Employee Relations Management by P. N. Singh, Neeraj Kumar

Employee
Relations
Management
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Employee
Relations
Management
P. N . S I N G H
NEERAJ KUMAR
Delhi • Chennai • Chandigarh
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To my loving, departed wife, Usha.
P. N. Singh
To my parents, Kusum and Balram Thakur.

I would be nothing, but for your constant support and
the encouragement for learning that you provided
throughout my life.
Neeraj Kumar
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about the authors
P. N. Singh, a postgraduate in labour and social welfare from Patna University, started
his career in 1962 with NMC as a management trainee. Two years later, in 1964, he joined
the Bokaro Steel Plant which was then at the project stage. He worked there for 29 years,
rising through the ranks to head the human resource management function during the last
three years of his service as Executive Director (Personnel and Administration). From there,
he moved to the State Trading Corporation as Personnel Director for a short while before
joining SAIL in 1994 as Director, Personnel. Having worked in the industry for nearly three-
and-a-half decades, he switched to academia in 1996 when he joined the Institute of Man-
agement Technology, Ghaziabad as a professor in the area of organizational behaviour and
human resources. Concomitantly, he also served as Vice Chairman, Appeals Committee,
ONGC for three years. In 2004, he shifted to the FORE School of Management as Senior
Professor, OB and HR. He taught there for three years before joining the Army Institute of
Management in 2008.
An excellent negotiator, Professor Singh is credited with having established numerous
systems relating to human resources management at the Bokaro Steel Plant. He has led
path-breaking settlements with unions on issues of redeployment of surplus in line with
business requirement. As a member, and later Convenor of the National Joint Consultative
Committee for Steel Industry, he managed to settle the wage agreements for the Indian
steel industry through collective bargaining with representatives of the central trade union
organizations. At a policy-making level, he has been instrumental in many strategic ini-
tiatives including human resources planning for modernization, managing change through
people and the turnaround of SAIL. From shop floor to board room, he has handled the
entire range of issues relating to human resources management in general, and employee
relations in particular. He has also been a member of tripartite committees on contract
labour.
Having headed the HR functions of two very prominent PSUs in India, P. N. Singh
is experienced in successfully resolving industrial conflicts and establishing systems and
procedures for handling employee relations issues in a multi-union environment. He uses
this rich experience to provide an industry perspective to aspiring managers in the class-
room. Besides teaching, he also works as a consultant and conducts management develop-
ment programmes in both public and private sector organizations.
Neeraj Kumar holds a bachelors degree in physics from the University of Delhi and
a postgraduate diploma in Labour and Social Welfare from the University of Calcutta. He
started his career with the SAIL in 1981 as a management trainee. In his 23-year career with
SAIL, he handled all the functions of HR including industrial and employee relations, per-
formance management, strategic HRM and organization development. In the early phases of
his career, he handled employee-related issues at various shop floors in the highly unionized
environment of the Durgapur Steel Plant. He successfully introduced many productivity and
discipline improvement measures at the shop floor through discussions and negotiations
with the employees and their unions. Later, he moved to corporate HR where he was closely
associated with the change management and turnaround initiative at SAIL.
Professor Kumar quit SAIL in 2004 to work as a freelance consultant in areas pertaining
to HRM, management of discipline, negotiations and collective bargaining, leading, team-
ing, communicating and other soft skills (such as inter and intrapersonal effectiveness, han-
dling conflicts, managing emotions, negotiating and adapting to change). He used his long
industry experience to design and deliver management development programmes in leading
private and public enterprises including Xansa, SAIL, Bharti Airtel, BALCO, HINDALCO,
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viii About the Authors
METSO Minerals, Punj Lloyd, Daewoo Motors, NTPC, Motherson Sumi Systems Limited,
Capgemini, PGCIL, GAIL India, Engineers India Limited, Wockhardt, Maruti Udyog Lim-
ited, Siemens and Perot Systems.
Neeraj Kumar has been a part of academia since he joined the FORE School of Manage-
ment as an associate professor in the area of organizational behaviour and human resources
management in 2008. He teaches HRM, industrial relations, performance and compensation
management, labour legislations and organization design and change.
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contents
Foreword xix
Preface xxi
PART I CONTEXT
1 Industrial Relations: Evolution and Growth 2
1.1 THE EVOLUTION OF INDUSTRIAL RELATIONS 3
1.2 DEFINITIONS OF INDUSTRIAL RELATIONS 5
1.2.1 A Working Definition 5
1.3 THE SCOPE OF INDUSTRIAL RELATIONS 6
Box 1.1 For Class Discussion 7
1.3.1 Factors Shaping the Industrial Relations Climate 8
1.4 OBJECTIVES OF INDUSTRIAL RELATIONS 8
1.4.1 At the Industry or Enterprise Level 8
1.4.2 At the State Level 8
1.5 ESSENTIAL FEATURES OF INDUSTRIAL RELATIONS 9
1.5.1 Conditions for Congenial Industrial Relations 10
1.5.2 Principles for Promoting Healthy Industrial Relations 10
1.6 PARTICIPANTS OF INDUSTRIAL RELATIONS SYSTEM
AND DYNAMICS OF THEIR PARTICIPATION 10
1.7 INDUSTRIAL RELATIONS: PERSPECTIVE AND APPROACH 11
1.7.1 The Unitary Approach 12
1.7.2 Systems Approach: The Dunlop Model 13
1.7.3 The Conflict Approach 14
1.7.4 Weber’s Social Action Approach 16
1.7.5 The Gandhian or Trusteeship Approach 17
1.7.6 The Marxian or Radical Approach 17
Summary 19 • Key Terms 20 • Review Questions 20 •
Questions for Critical Thinking 20 • Debate 20 • Case Analysis 20 •
Notes 21 • Suggested Reading 21
2 Industrial Relations in India 22

2.1 THE SYSTEM OF INDUSTRIAL RELATIONS IN INDIA 23
2.1.1 The Role of the State 25
2.1.2 The Labour Policy 25
2.1.3 Tripartism in India’s Industrial Relations System 26
2.1.4 The Impact of the ILO on Indian Labour Relations 27
2.2 THE HISTORICAL PERSPECTIVE 28
2.2.1 The Protective Phase (1947–1956) 29
2.2.2 The Consolidation Phase (1956–1965) 31
2.2.3 The Conflict-ridden Interventionist Phase (1966–1976) 33
2.2.4 The Directionless Phase (1977–1980) 34
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x Contents
2.2.5 The Productivity-, Efficiency-, Quality-orientation

Phase (1981–1990) 34
2.2.6 The Competitive Phase 34
2.3 TRENDS IN INDUSTRIAL RELATIONS MANAGEMENT 35
2.3.1 The Inclusion of the Needs of Unorganized Labour 35
2.3.2 Labour Laws 36
2.4 CONCLUSION 37
Notes 40 • Suggested Reading 40 • Appendix I 40 •
Appendix II 41 • Appendix III 44
3 Industrial Relations in Major Industrialized

Economies: A Comparative Study 46
3.1 INDUSTRIAL RELATIONS: A HISTORICAL PERSPECTIVE 47
3.1.1 The International Factors 48
3.1.2 The Political Factors 49
3.2 INDUSTRIAL RELATIONS IN THE UK 50
3.2.1 The Evolution 50
3.2.2 Trade Unions in the UK 51
3.3 INDUSTRIAL RELATIONS IN THE EUROPEAN UNION 52
3.3.1 The Trends in the EU 52
3.4 INDUSTRIAL RELATIONS IN THE USA 53
3.4.1 Trade Unions in the USA 53
3.4.2 Labour Legislations in the USA 53
3.5 INDUSTRIAL RELATIONS IN AUSTRALIA 54
3.5.1 The Evolution 54
3.5.2 The Recent Changes 55
3.5.3 Trade Unions in Australia 55
3.6 INDUSTRIAL RELATIONS IN CHINA 56
3.6.1 The Historical Perspective 56
3.6.2 Trade Unions in China 56
3.7 INDUSTRIAL RELATIONS IN JAPAN 57
3.7.2 Trade Unions in Japan 57
3.8 INDUSTRIAL RELATIONS IN SOUTH KOREA 58
3.8.2 Trade Unions in South Korea 59
3.9 INDUSTRIAL RELATIONS IN SINGAPORE 59
3.10 INTERNATIONAL TRENDS 60
4 The Changing Characteristics of Industry

and Workforce in India 64
4.1 THE CHANGING CHARACTERISTICS OF INDUSTRIES 65
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Contents xi
4.2 THE CHANGING CHARACTERISTICS OF THE INDUSTRIAL

WORKFORCE 67
4.2.1 The Indian Workforce Prior to the Recent Changes 67
4.2.2 The Impact of Industrial Change on the Workforce 68
4.2.3 The Factors Facilitating Adaptation to Changes 68
4.2.4 The Current Employment and Unemployment Situation 69
4.2.5 The Composition and the Demographic Features of the Workforce 69
4.3 THE DEMAND FOR LABOUR 71
4.3.1 Employment Distribution 71
4.3.2 The Impact on Labour Deployment, Utilization and Productivity 73
4.4 THE CHALLENGES TO IR 74
4.4.1 The Employer’s Perspective 74
4.4.2 The Employee’s/Union’s Perspective 75
4.4.3 The Government’s Perspective and the Labour Laws 75
Summary 76 • Key Terms 77 • Review Questions 77 • Questions
for Critical Thinking 77 • Debate 77 • Case Analysis 77 •
5 Trade Unionism and Trade Unions 80

5.1 THE CONCEPT OF TRADE UNIONISM 81
5.1.1 Characteristics of Trade Unionism 82
5.1.2 The Origin of Trade Unionism 82
5.1.3 The Impact of Trade Unions 83
5.1.4 Principles of Trade Unionism 83
5.1.5 Theories for the Emergence of Trade Unionism 83
5.1.6 Reasons for Joining a Trade Union 84
5.1.7 Tools of Trade Unionism 84
5.2 POLITICS AND TRADE UNIONS 85
5.3 RIGHTS OF TRADE UNIONS 86
5.4 ROLES, FUNCTIONS AND OBJECTIVES OF TRADE UNIONS 87
5.4.1 Objectives of Trade Unions 87
5.4.2 Functions of Trade Unions 88
5.4.3 Activities of Trade Unions 90
5.5 FEATURES OF AN EFFECTIVE TRADE UNION 91
5.6 THE CLASSIFICATION OF TRADE UNIONS 92
5.6.1 The Evolution of the Trade Union Structure 93
5.6.2 Determinants of the Growth of Trade Unions 93
5.7 STRATEGIES FOR THE ACHIEVEMENT OF TRADE UNION
OBJECTIVES 94
5.8 THE STATE OF TRADE UNIONS IN THE WORLD 95
Summary 97 • Key Terms 97 • Review Questions 98 • Questions
for Critical Thinking 98 • Debate 98 • Case Analysis 98 •
6 Trade Unions in India 100

6.1 PHASES IN THE GROWTH OF TRADE UNIONS IN INDIA 101
6.1.1 The Pre-independence Phase 101
6.1.2 The First Post-independence Phase 102
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xii Contents
6.1.3 The Second Post-independence Phase (Mid-1960s–1980) 102

6.1.4 The Third Post-independence Phase
(1980–Pre-liberalization Era) 103
6.1.5 The Fourth Post-independence Phase (Post-liberalization Era) 103
6.2 THE STRUCTURE OF TRADE UNIONS IN INDIA 103
6.3 UNION SECURITY 104
6.4 POLITICAL AFFILIATIONS OF TRADE UNIONS 105
6.5 THE PROBLEMS OF TRADE UNIONS IN INDIA 107
6.5.1 The Politicization and Proliferation of Unions 107
6.5.2 Outside Leadership 109
6.5.3 Inter-union Rivalry 109
6.5.4 Intra-union Rivalry 109
6.5.5 Small Size 109
6.5.6 Financial Insecurity 109
6.5.7 The Changing Demography of Workforce 110
6.6 THE RECOGNITION OF UNIONS 110
6.7 RIGHTS OF RECOGNIZED UNIONS 111
6.8 UNFAIR LABOUR PRACTICES WITH REGARD TO TRADE UNIONS 112
6.9 TRADE UNIONISM IN INDIA TODAY 112
6.10 THE TRADE UNIONS ACT, 1926 114
6.10.1 Scope and Coverage 115
6.10.2 Objectives 115
6.10.3 Provisions 115
6.11 MANAGERIAL TRADE UNIONISM 117
Questions for Critical Thinking 118 • Debate 118 • Case
Analysis 118 • Notes 120 • Suggested Reading 120
PART II PARADIGM SHIFT

7 From Industrial Relations to Employee
Relations 122
7.1 A SHIFT IN FOCUS 124
7.1.1 The Employee–Employer Relationship 125
7.1.2 Why ERM? 126
7.2 EMPLOYEE RELATIONS MANAGEMENT 126
7.3 INDUSTRIAL RELATIONS AND EMPLOYEE RELATIONS:
DIFFERENCES IN PERSPECTIVES 127
7.3.1 Influencing Factors 127
7.3.2 Principles 129
7.3.3 Scope 130
7.3.5 Preconditions 132
7.3.6 Measures 133
7.3.7 Linkage Human Resource Management 134
7.3.8 Line or Staff Function 134
7.3.9 The Role of an HR Manager 136
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Contents xiii

Analysis 138 • Suggested Reading 139
8 Employee Relations Management at Work 140

8.1 EMPLOYEE RELATIONS IN A STRATEGIC FRAMEWORK 142
8.2 EMPLOYEE RELATIONS AT THE WORKPLACE 144
8.2.1 Principles, Structures, Functions, Policies and Processes 144
8.2.2 The Role of an Employee Relations Manager 149
8.3 CULTURE AND EMPLOYEE RELATIONS 149
8.3.1 Culture Design for Employee Relations 152
8.3.2 Organizational Behaviour in Culture Design 152
8.4 THE FUTURE OF EMPLOYEE RELATIONS 153
8.4.1 Transition 154
8.4.2 Employee Relations and the Management of Change 155
PART III LEGISLATIONS AND ADMINISTRATION

9 Labour Legislation in a Changing Context 160
9.1 THE CLASSIFICATION OF LABOUR LAWS 162
9.1.1 The Regulation of Working Conditions 163
9.1.2 Legislations Related to Social Security 163
9.1.3 Legislations Related to Wage and Bonus 164
9.1.4 Industrial Relations and Conflict Prevention 164
9.2 THE SCHEME FOR A STRUCTURED STUDY OF THE ACTS 164
9.3 THE FACTORIES ACT, 1948 165
9.3.2 Coverage 165
9.3.3 Applicability 165
9.3.4 Definitions 166
9.3.5 Structure 168
9.3.6 Main Provisions 168
9.4 THE SHOPS AND ESTABLISHMENTS ACT, 1953 182
9.5 THE CONTRACT LABOUR (REGULATION AND ABOLITION)
ACT, 1970 184
9.5.4 Registration and Licensing 185
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xiv Contents
9.5.5 Duties of the Controlling Authorities 185

9.5.6 Duties of Contractors 186
9.5.7 Duties of the Principal Employer 186
9.5.8 The Engagement of Contract Labour 187
9.5.9 The Prohibition of Employment of Contract Labour 187
9.5.10 The Central and State Advisory Boards 188
9.5.11 Facilities for Contract Labour 188
9.5.12 Payment of Wages 188
9.5.13 Other Laws Applicable to Contract Labour 188
Analysis 192 • Notes 193
10 Social-security Legislations 194

10.1 MAJOR LEGISLATIONS 195
10.2 THE EMPLOYEES’ STATE INSURANCE ACT, 1948 196
10.2.1 Scope, Applicability and Coverage 196
10.2.2 Important Terms Used in the Act 198
10.2.3 Administration 199
10.2.4 Benefits in Detail 201
10.2.5 Obligations of Employers 203
10.3 MATERNITY BENEFIT ACT, 1961 204
10.3.2 Coverage 204
10.4 THE WORKMEN’S COMPENSATION ACT, 1923 206
10.4.2 Compensation 209
10.5 THE PAYMENT OF GRATUITY ACT, 1972 212
10.5.1 Scope, Coverage and Definitions 212
10.5.2 The Calculation of Gratuity 213
10.5.3 Gratuity Not Payable 213
10.5.4 Obligations of the Employer 214
10.5.5 The Process for Receiving Payment 214
10.6 EMPLOYEES’ PROVIDENT FUNDS AND MISCELLANEOUS
PROVISIONS ACT, 1952 214
11 Wage Legislation 222

11.1 THE HISTORY OF WAGE LEGISLATION 223
11.1.1 The Need for Wage Legislation 224
11.1.2 The Regulation of Wages 224
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Contents xv
11.2 THE PAYMENT OF WAGES ACT, 1936 224

11.2.1 Coverage 225
11.2.2 Important Terms 225
11.2.4 The Enforcement Machinery 227
11.2.5 Penal Provisions 227
11.3 THE MINIMUM WAGES ACT, 1948 227
11.3.1 Objectives, Scope and Coverage 228
11.4 THE PAYMENT OF BONUS ACT, 1965 232
11.4.1 Labour Appellate Tribunal (LAT) Formula 233
11.4.2 Bonus Commission 233
11.4.4 Applicability 233
12 Industrial Relations: Institutional Framework

for the Prevention and Settlement
of Industrial Disputes 244
12.1 INDUSTRIAL CONFLICT 245
12.1.1 The IR Perspective 245
12.1.2 The ER Perspective 246
12.2 THE BIG PICTURE 246
12.3 INDUSTRIAL DISPUTE UNDER THE ID ACT 247
12.4 INDUSTRIAL DISPUTE: CONCEPT 247
12.5 FORMS OF INDUSTRIAL ACTION 248
12.5.1 Different Forms of Strike 248
12.6 TYPES OF DISPUTES 252
12.6.1 The Classification of Disputes 253
12.7 SEVERITY OF EFFECTS 253
12.8 CAUSES OF INDUSTRIAL DISPUTE 253
12.9 MEASURES TO IMPROVE INDUSTRIAL RELATIONS 255
12.10 INDUSTRIAL DISPUTES: A HISTORICAL PERSPECTIVE 256
12.10.1 Sector-wise Trends 260
12.10.2 Spatial Trends 260
12.10.3 A State-wise Comparison 260
12.10.4 Industry-wise Trends 260
12.10.5 Cause-wise Trends 261
12.11 MACHINERY TO DEAL WITH INDUSTRIAL
DISPUTES 262
12.11.1 Statutory and Non-statutory Measures 262
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xvi Contents
12.12 THE INDUSTRIAL DISPUTES ACT, 1947 263

12.12.3 The Prohibition of Strike and Lockout 265
12.12.4 Illegal Strikes and Lockouts 266
12.12.5 Lay-off, Retrenchment and Closure 266
12.12.6 Closure of Undertaking 269
12.12.7 Last IN–First OUT 270
12.12.8 Unfair Labour Practices 270
12.12.9 Settlement Machinery 270
12.12.10 Conclusion 272
13 Industrial Conflict: Settlement Machinery 276

13.1 THE SETTLEMENT OF DISPUTES: AN OVERVIEW 277
13.2 CONCILIATION 279
13.2.1 Conciliation Officers 279
13.2.2 The Protection of Workmen During Pendency of Conciliation
Proceedings 281
13.3 OBLIGATIONS OF EMPLOYERS 281
13.4 OBLIGATIONS OF EMPLOYEES 282
13.5 THE BOARD OF CONCILIATION 282
13.6 THE PERFORMANCE OF CONCILIATION MACHINERY 283
13.7 ARBITRATION 283
13.7.1 Compulsory Arbitration 284
13.7.2 Voluntary Arbitration 284
13.7.3 National Arbitration Promotion Board 285
13.7.4 The Evaluation of the Working of Voluntary Arbitration 286
13.8 ADJUDICATION 286
13.8.1 Types of Adjudication 287
13.8.2 Labour Courts 287
13.8.3 The Second National Commission on Labour
on Labour Relations Commissions 289
13.8.4 Industrial Tribunals 289
13.8.5 National Tribunals 290
13.8.6 The Performance of Adjudication Machinery 290
13.9 THE RECOMMENDATION OF THE NATIONAL COMMISSION
ON LABOUR ON SETTLEMENT MACHINERY 290
14 Industrial Disputes: Institutional Framework

and Preventive Measures 294
14.1 HARMONIOUS RELATIONS 295
14.2 A FRAMEWORK OF PREVENTIVE MEASURES 295
14.2.1 Institutions/Consultative Bodies 296
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Contents xvii
14.2.2 Joint Consultative Tripartite Bodies 302

14.2.3 Industrial Committees 305
14.2.4 Bipartite Bodies 305
14.2.5 Works Committee 305
14.2.6 Joint Management Councils 308
14.3 ETHICAL CODE: CODE OF DISCIPLINE 308
14.3.1 Standing Orders 309
14.3.2 Grievance Procedure 310
14.3.3 Collective Bargaining 311
14.4 MANAGING DISCIPLINE 314
14.4.1 Disciplinary Procedures 315
15 Wage Determination, Wage Administration

and Employee Relations 322
15.1 THE CONTEXT AND CONCEPTS OF WAGE 323
15.1.1 Minimum Wage, Fair Wage and Living Wage 323
15.2 THE EVOLUTION OF WAGE ADMINISTRATION IN INDIA 325
15.2.1 Legislation 325
15.2.2 Policy Recommendations and Resolutions 326
15.2.3 Wage Boards 326
15.2.4 Job Evaluation 327
15.3 COMPONENTS AND DETERMINANTS OF WAGE 328
15.3.1 Components of Wage 328
15.3.2 Determinants of Wage 329
15.4 WAGE STRUCTURE 330
15.4.1 The Purpose of Wage Structure 330
15.5 TOWARDS A WAGE POLICY 330
16 Labour Administration 334

16.1 AN INTRODUCTION TO LABOUR ADMINISTRATION 335
16.1.1 The Concept of Labour Administration 335
16.2 SCOPE OF LABOUR ADMINISTRATION 336
16.3 THE EVOLUTION OF LABOUR ADMINISTRATION IN INDIA 337
16.4 LABOUR POLICY IN INDIA 338
16.5 LABOUR LAWS 340
16.6 VOLUNTARY ARRANGEMENTS 341
16.7 LABOUR ADMINISTRATIVE MACHINERY OF THE GOVERNMENT 342
16.7.1 Ministry of Labour 342
16.7.2 Attached Offices 342
16.7.3 Subordinate Offices 343
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xviii Contents
16.7.4 The Autonomous Organizations 343

16.7.5 Adjudication Bodies 344
16.7.6 Labour Administration Machinery of the State Government 344
16.8 THE ROLE OF ILO IN LABOUR ADMINISTRATION 344
16.9 RECOMMENDATIONS OF THE SECOND NATIONAL
COMMISSION ON LABOUR, 2002 345
PART IV SKILLS
17 Negotiation Essentials for Employee
Relations 350
17.1 CONFLICT AND NEGOTIATIONS 351
17.1.1 Approaches to Resolve Conflict 352
17.1.2 The Dual Concern Model of Conflict Resolution 356
17.1.3 Is “Conflict” Desirable? 357
17.2 NEGOTIATION 357
17.3 EMPLOYEE RELATIONS AND NEGOTIATIONS 358
17.3.1 Situations Requiring Negotiation 358
17.4 INTEGRATIVE AND DISTRIBUTIVE NEGOTIATION STRATEGIES 359
17.5 THE BASIC NEGOTIATION PROCESS 362
17.5.1 Preparation 362
17.5.2 Opening 363
17.5.3 Bargaining 364
17.5.4 Closing 364
17.6 ESSENTIAL SKILLS 364
18 Soft Skills for Employee Relations 370

18.1 WHAT ARE SOFT SKILLS? 371
18.2 EMOTIONAL INTELLIGENCE AND COMPETENCE 372
18.3 A “FRAMEWORK” 373
18.4 THE ROLE OF AN ER MANAGER/PROFESSIONAL 374
18.5 CONCLUSION 376
GLOSSARY 379
INDEX 389
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foreword
While knowledge management is increasingly considered significant for business success
and there is increasing use of technology in knowledge management, books written by prac-
titioners has been an age-old effective form of knowledge management. I feel honoured to be
asked to write a foreword for this new book on Employee relations management authored by
two very experienced managers codifying their decades of experience.
When I was doing my Ph.D. in England on Industrial Relations, often, there was talk about
approaching the subject as “employee relations” rather than “industrial relations”. Employee
relations has become both a reality and a necessity in the wake of globalization, increasing
competition, demographic changes, and increased levels of education and awareness through
the spread of print and electronic media. While the growth of human resource management as
a discipline altered the way one looked upon and managed white-collar employees, our way of
addressing the issues of grass-root employees, who often rely on physical labour and manual
skills, remained relatively unchanged. The turbulent decade of the 1980s led to the questioning
of the traditional tools and techniques of labour management. As often happens, this seeking
of solutions also led to the searching of souls. It dawned on practitioners and theoreticians alike
that it was not just a question of tools and techniques but a fundamental change of mindset and
approach that was required to elicit productive response from employees to enhance competi-
tiveness. Discretionary contribution of employees was not dependent on the management exer-
cising its discretion; rather the management realization that true exercise of discretion meant a
newer approach to addressing traditional relationships.
I am glad that two experienced professionals, P.N. Singh and Neeraj Kumar have chosen
to capture certain facts of this new movement in the Indian context in their new book. Both
of them worked for decades in various capacities with the illustrious Steel Authority of India
Limited, a well-known public-sector navratna which at one time had the distinction of
employing more than 160,000 employees. Despite the constraints of being a public-sector
organization, SAIL pioneered many leading employee relations practices and often worked
as a laboratory for experimenting with new innovations in this difficult area. The geographic
spread of its plants in diverse climatic and cultural environments often challenged the best
human resource managers and their skills in creating productive employer–employee rela-
tionships. The authors were nurtured in this environment and undoubtedly developed a
point of view on how employee relations can be effectively managed in the Indian context
and in the context of large manufacturing corporations.
The book, divided out into eighteen chapters, focuses on each area of employee relations
and covers both the legal and the contextual factors that impact the framework of such rela-
tionships. I am confident that this book will be an important additional source of knowledge
and insight for both practitioners and researchers of employee relations in India. I wish the
book great success.
Dr Santrupt B. Misra
Director
Aditya Birla Management Corporation Limited
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preface
Employee Relations Management is a textbook for students and practitioners of HRM
(both beginners and specialists) who wish to learn the concepts, their applications and
the latest trends in the field of industrial relations (IR). Based on our experiences as managers
and instructors, we have attempted to write a textbook that is practical, contemporary
and application-oriented. This book attempts to link actual happenings in industry with the
existing body of knowledge that exists in this field. In our opinion, a clear understanding of
both is necessary for developing an interest in the subject.
The Motivation for This Book

Having spent several decades in the industry and in academia, we have been acutely aware of the
need for a textbook in the area of employee relations/industrial relations that clearly establishes
the link between classrooms and workplaces. We sorely felt the need for a textbook that could
make abstract concepts real, for both practising and aspiring managers and students. Since the
subject matter of industrial relations is largely country-specific, we found that the available titles
either leaned towards concepts and research or focused on wider coverage of the syllabuses.
As instructors at the postgraduate level, we needed a textbook that would cover the theo-
retical topics in the field of industrial relations; correlate the concepts to prevalent industry
practices and real events; and pose probing, thought-provoking questions to enable students
and instructors explore the topics. Further, we felt that a textbook should bring to life a few
difficult areas in labour legislations. We believed that illustrations highlighting different situ-
ations inviting the application of various legislations, calculation of workmen’s compensa-
tion, PF contributions, gratuity and bonus, etc. would be immensely helpful in a textbook.
From Industrial Relations to Employee Relations

We witnessed the profound effects of liberalization and other policy changes on industrial rela-
tions. We needed a textbook that would explain the concepts against the background of these
changes in the economy and industry, describing the consequences of these changes on industrial
relations and related concepts. So when we began working on this book, we made a conscious
decision to emphasize the shift that is taking place as a result of liberalization and globalization.
These two factors have forced employers, governments and trade unions to align to new realities.
There is an ongoing paradigm shift from conflict resolution in traditional industrial relations to
collaborative partnerships through employee relations management. Hence, the title of the book.
The Organization of the Book

Employee Relations Management is divided into four parts and comprises 18 chapters in all.
Part I covers the broad context, evolution, conceptual framework of industrial relations. It
essentially deals with topics that were traditionally covered in a textbook of industrial relations.
This is essential for a student new to the subject: it lays the conceptual foundation on which to
build. However, here too, we have tried to establish their relevance to extant practices in industry,
wherever possible. The evolution and growth of IR, IR in India and major economies of the world,
trade unionism and trade unions in India are discussed in this part.
Part II focuses on the shift that is taking place in organizations, from the legacy practices of
managing relationships through formal bodies of employees to a more direct, strategic approach.
Part III takes the readers through different aspects of labour administration and leg-
islation. In this part, we have ensured that readers comprehend the laws instead of merely
committing them to memory. The nature of conflicts and disputes, the measures for resolv-
ing them, process of bargaining and industrial discipline, wage and labour administration
machinery have been covered in this part in detail.
Part IV covers the soft skills for a professional in the area of HRM/ERM, with special
emphasis on negotiation skills.
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xxii Preface
Features
The book incorporates several pedagogical features that have been designed to foster the ability to question, correlate and
analyse events from the real-world in the context of employee relations.
Chapter Outlines Learning Objectives

Chapter outlines capture the major topics Learning objectives capture the salient points that students
that are discussed within the chapter. need to focus on while studying the chapter.
CHAPTER OUTLINE LEARNING OBJECTIVES

5.1 The Concept of Trade Unionism After reading this chapter, you will be able to:
5.2 Politics and Trade Unions • Describe the concept of trade unionism
5.3 Rights of Trade Unions • Identify the factors that led to the origin and
5.4 Roles, Functions and Objectives of Trade the growth of trade unions
Unions • Define the principles underlying trade
5.5 Features of an Effective Trade Union unionism
5.6 The Classification of Trade Unions • Understand the various approaches to the
5.7 Strategies for the Achievement of Trade study of trade unions
Union Objectives • Understand the structure, functions and
5.8 The State of Trade Unions in the World activities of trade unions
Tata’s Takeover of Jaguar and Land Rover1
The takeover of Jaguar and Land Rover, emblems of the British auto, by Tata Motors in March 2008 was greeted with
approval but regret by Unite, Britain’s largest trade union formed by the merger of Amicus and the Transport and General
Workers’ Union on 1 May 2007.
Unite, though not happy about the impending ownership change, in early July 2007, sent a five-point charter to Ford
demanding, among other things, that the union be involved in the sale process. The union members were present in the
early stages of presentations and negotiations between Ford and the bidders. Despite the lack of unanimity among the
rank and file of Unite, the union’s preference helped Tata Motors to emerge the front-runner, leaving the other bidders
behind.
In November 2007, Unite issued a public statement saying that, of all the bidders, Tata Motors, with an established presence
and background in manufacturing, was its preferred buyer for Jaguar and Land Rover. Tata Motors, realizing how critical
it was going to be for them to take Unite along for both the acquisition and post-acquisition support, during the various
stages of discussion and negotiation with Ford, reiterated through various channels that the jobs of the workers at Jaguar
and Land Rover would remain secure and post-takeover, the 160,000-odd jobs across the various Ford sites in Britain would
continue untouched.
In January 2008, about three months prior to the actual closing of the deal, Tony Woodley, General Joint Secretary, Unite,
said in a press release that detailed meetings focusing on the job security of the workers in Jaguar, Land Rover and other
Ford plants in the UK were necessary. Other crucial issues around wages, terms and conditions and pension also needed to
be addressed before the final decision could be taken.
In March 2008, the takeover was formalized, but only after Tata Motors issued an undertaking that jobs would be saved.
Tata Motors also committed to long-term supply agreements for components from Ford units in the UK.
Opening Vignettes
Opening vignettes present snapshots of real-world scenarios. These
M01_SING6013_01_C05.indd 80
give a practical flavour to the concepts discussed in the chapter. 3/19/10 5:15:55 PM
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Preface xxiii
Policies and Procedures Margin Definitions and Notes

Need to be written
in a language easily Margin definitions and notes capture the definitions and salient points
understood
Should be widely
from each page.
circulated
Consulted for guid-
ance BOX 12.4 FOR CLASS DISCUSSION
Set standards of work-
The features of an effec- Nandigram in East Midnapur district of West Bengal is one of the seven SEZs sanctioned in
place behaviour and
practices tive trade union are: West Bengal. The proposed SEZ (now scrapped) was to develop a mega-chemical hub. The
Define the scope and choice of this mega-chemical hub in the Haldia region was the result of a long exercise
Internally democratic
limits of the influence undertaken by the Government of India where this venue was chosen along with four other
Have a strong leader-
of the workplace ship sites in the country. With the existing petroleum refinery of the IOC, the petrochemical plant
at Haldia in the joint sector and the huge facility of Mitsubishi chemicals, this decision to
Exhibit a responsibility
towards their worker have the mega-chemical hub located here made business sense. The Haldia petrochemi-
members cals have led to 700 units in the downstream providing an employment to over 1 lakh
Committed to promote people. The Government of West Bengal had signed a Memorandum of Understanding
industrial peace and with the Indian Oil Corporation to be an anchor investor for the project, while the Salim
harmony group would have been the promoter for building the infrastructure.
Inclined towards col- The Chief Minister of West Bengal had stated no progress on the project would take
lective bargaining that place until consultations were held with elected representatives in the panchayat and the
is collaborative and
people of the area. As there had been no survey done and consultations held, the question
not competitive.
of land acquisition did not arise before these processes took place.
Possess financial secu-
rity The demand was that land acquisition would only take place if a credible plan
Adaptable to change
for improving the quality of life and livelihood could be put forth. This was the overall
approach of the left.
To add to the unrest, a number of other political forces had come together at
M01_SING6013_01_C08.indd 148 Nandigram. There were cases of legitimate protests and also cases of 5:28:52
3/22/10 planned PM violence
disrupting the peace at Nandigram. The compelling reason for any such project in the
state will be premised on the question of employment generation and improving the lot
“For Class Discussion” Boxes of the poor and disadvantaged sections. The Left Front had anticipated the need for such
3/19/10a 5:16:01
projectPM on the eve of the last elections. Therefore, the Left Front election manifesto had
clearly stated: “Industrial parks have been decided to be set up in the task of modernizing
“For Class Discussion” boxes the traditional labour-intensive industries, and to make them competitive. Parks will be set
contain topics for exploring and up for foundry, jute, rubber, garments, textile, iron and steel, chemicals polymer, light engi-
analysing issues from different neering, and food” and “a minimum of four big industrial taluka and special economic
perspectives, leading to a better zones will be set up in the state”.
understanding of the subject The industrial conflict here was with regard to the nature of the industry and the manner
matter. in which it took place. The difference in perception was with regard to the private corporate’s
way of viewing industries and that of the Left. Will this have an effect on workplace IR?
SUMMARY Summary
Unions are organizations designed to promote and enhance Security: The security of employment of their members must
the social and economic welfare of their members. be safeguarded. The summary recapitulates
The unions emerged to protect worker interests, and, Trade unions have the following main objectives:
the key concepts, definitions
gradually, started playing an important role in the social and
Ensure the security of workers
and points from the chapter.
political affairs of a country. It serves as a ready reference
Obtain better economic returns
Trade unions are part of the fabric of industrial democracy for students who want to
and can play a constructive role in improving production Improve working conditions
and productivity, and the resolution of conflicts.
revise the concepts learned in
Power to influence management

a chapter
Trade unionism had initially grown in order to:
Power to influence the government
REVIEW QUESTIONS Review Questions

1 What are the characteristics of trade unions? ii. characteristics of trade unionism
Review questions included
2 What is a trade union and how are they generally formed? iii. classification of trade unions
Trace the genesis of trade unions.
at the end of each chapter
iv. strategies for the achievement of objectives of a trade are designed to help students
3 Explain the following: union
M12_SING6013_01_C12.indd 255
check their comprehension of 6/11/10 5:4
i. the objectives of a trade union
concepts.
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xxiv Preface
QUESTIONS FOR CRITICAL THINKING

1 The growing internationalization of business and workforce and fears. Discuss probable employer response and union
Questions for Critical Thinking has its impact on HRM in terms of problems of unfamiliar response to these changes. Give examples to support your
laws, languages, practices, attitudes, management styles, answer.
work ethics and more. HR managers face a challenge to
Questions for critical thinking, deal with more and more heterogeneous sets of workers
3 There are signs of changing demographics of the workforce
reflected in age and qualification mix, dual career couples,
presented at the end of each chapter, and more involvement in the employee’s personal life.
large chunk of young blood with contrasting ethos of work
Discuss these changes in the light of industrial relations
are designed to foster analysis and management.
among old superannuating employees, growing number
of women in workforce, working mothers, more educated
application of concepts to solve 2 Liberalization has led to large-scale reorganization and aware workers, etc. Thus, the changing demography of
problems. of businesses in terms of expansions, mergers and workforce has its own implications for industrial relations.
acquisitions, joint ventures, takeovers, and internal Discuss these implications and the strategies required to
restructuring of organizations. In circumstances as cope with the same.
dynamic and as uncertain as these, it is a challenge to
manage the employees’ anxiety, uncertainties, insecurities
D E B AT E
1 The second National Commission on Labour has recom- The IT industry and hospitals, however, will be exempted.
mended the enactment of a general law relating to hours of Women’s groups are already protesting saying this is not a
work, working conditions, annual leave, welfare, contract progressive step. It may hinder progress of women, they say.
labour and others applicable to various categories of estab- The employers say that in the world of business today one
lishments alike. In a competitive environment, such provi- cannot have a segregated and isolated approach towards Debate
sions would further erode the competitiveness of Indian women workforce.
business.
The government says it is the only way to ensure protec- Topics for debate have been
2 Is the Shops and Establishments Act, as it obtains today, an tion for women and will target the hotel industry, shopping
impediment to 24 7 customer service? malls and recreation centres. The recent incident of the included to encourage students
3 Read the box-item below. What could be the arguments
murder of a woman employee returning from late night to understand and appreciate the
shift has prompted government concerns regarding wom-
from each side?
en’s safety.
various aspects of a problem.
M01_SING6013_01_C04.indd 77 3/19/10 3:15:13 PM
The Karnakata government’s plan to ban night shifts for
4 Rather than abolish contract labour, we need to regulate it by
women is ruffling feathers in Bangalore.
protecting equality of wages, workers’ health, safety, welfare
Women employees in the hotel Industry have to work late and access to various amenities at the workplace.
night shifts. And the number is substantial. But that might
5 Trade unions and workers’ organizations can focus on “equal
soon change. The Karnataka Assembly has passed a new Bill
pay for equal work”, rather than on the absorption of con-
that seeks to ban night shifts for women in firms that come
tract labour.
under the Karnataka Shops and Establishments Act.
C A S E A N A LY S I S
Case Analysis
Labour Trouble in Nepal of the Maoists, is asking NKM Beverages to give permanent
Each chapter concludes with A soft-drink manufacturing unit of a New Delhi-based
employment to seasonal workers who have been employed for
two cases for analysis. Based on over 240 days, with sick leave and other facilities. The protest
businessman, N. K. Mishra, ran into labour trouble with
was reportedly triggered by the company’s directive to the
recent incidents in the industry, angry workers protesting outside the NKM office trouble in
temporary employees to go on “unpaid leave” during off-season.
Nepal. The NKM, which has interests in real estate, retailing,
the discussion of these cases hospitality and education, also has stakes in the XYZ beverages What would be your advice to deal with this IR problem?
can be open ended, though the industry. Although Maoist guerrillas have made their peace
Industrial Relations at McDonald’s
with the government, giving a respite to businessmen who
questions at the end help the had been bearing the brunt of bomb blasts, extortion and McDonald’s is basically a non-union company.
instructor direct the discussion shutdowns, the beverages industry has come under attack from
Collect information on the industrial relations practice followed
to relevant issues in the case. the labour union affiliated to the Communist Party of Nepal.
by McDonald’s in different countries where it operates.
The communist union, in a bid to nip the growing popularity
M01_SING6013_01_C09.indd 192 3/25/10 4:56:36 PM
A00_SING6013_01_FM.indd xxiv 6/21/10 4:29:41 PM

Preface xxv
The Teaching and Learning Package

A full range of resources that support teaching and learning is available with this book. The
resources may be downloaded from www.pearsoned.co.in/pnsingh
For Instructors
PowerPoint Lecture Slides comprising chapter outlines, major concepts, diagrams, chapter
summaries are available for each chapter.
For Students
The Study Card captures key concepts and definitions from each of the chapters. It is designed
to enable the reader to browse through the salient points of each chapter quickly.
Acknowledgements
This book is all that we have learned as practitioners and instructors in our combined journey
as HRM professionals and instructors. We have tried to keep the book simple, for students,
practitioners and instructors.
We acknowledge with thanks the encouragement provided by the managements of
FORE School of Management and IMT Ghaziabad towards the completion of this book.
We had several rounds of enriching discussions with several practitioners and aca-
demicians and we will be failing in our duty if we do not acknowledge their contribution.
K. S. Sethi, Dean, MDI and former professor at IIM Calcutta; Santrupt Mishra, Director,
Aditya Birla Group of Industries; D. N. Pandey, Professor, British University, Dubai; M. K.
Kushwaha, Director, Army Institute of Management; A. K. Malkani, Professor, Ranchi Uni-
versity; and B. D. Singh, Director, KRIBHCO have helped enhance the book. We would also
like to express our thanks to A. K. Sinha, President–HR (Aluminium Group) and K. K. L.
Das, Chief People’s Officer at the Aditya Birla Group of Industries. A. K. Sharma, Chairman
and Managing Director, Amrapali Group has been a source of immense inspiration to us for
which we are grateful to him.
We also acknowledge the reviewers who made valuable suggestions and critical com-
ments, which helped in polishing the manuscript further. We wish to thank the members of
the consultant board for their timeless dedication and commitment—Aijaaz Mattoo, Dean,
School of Business Studies, Islamic University of Science and Technology, Kumar Mohit
Spring, Professor, Xavier Institute of Social Service and Nandini Bajaj, Assistant Professor, Sri
Bhagwan Mahaveer Jain College of Engineering, Bangalore. The consultant board’s critical
analysis of each chapter and their feedback on the entire book helped us create a lucid and
student-friendly text.
Thanks are due to the staff of Pearson Education, particularly to Praveen Tiwari and
Soma Banerjee, whose unstinted support, encouragement, help and faith made the book pos-
sible. Their patience and faith has been extraordinary.
P. N. Singh
Neeraj Kumar
A00_SING6013_01_FM.indd xxv 6/21/10 4:29:43 PM

part i
context
M01_SING6013_01_C01.indd 1 6/18/10 11:25:37 AM

chapter one
1.1 The Evolution of Industrial Relations After reading this chapter, you should be able to:
1.2 Definitions of Industrial Relations • Trace the necessity and evolution of
1.3 The Scope of Industrial Relations approaches to the study of industrial
1.4 Objectives of Industrial Relations relations
1.5 Essential Features of Industrial Relations • Identify and explain the components that
1.6 Participants of Industrial Relations System have been used to define industrial relations
and Dynamics of Their Participation • List the main actors of industrial relations
1.7 Industrial Relations: Perspective and and their respective roles in maintenance of
Approach industrial relations
• Identify the factors that shape the
environment for industrial relations
A Complex Web of Relationships1
In 2008, in a move that earned it the wrath of worker unions, New Zealand’s largest bank, ANZ National, decided to move
up to 500 jobs from New Zealand to Bangalore by 2009. The jobs were in processing and operational functions, and did not
involve any contact centre work.
In a statement, ANZ had said, “We are proposing to move 1 per cent of our New Zealand work to ANZ Bangalore this
calendar year, and up to 5 per cent by 2009.” The bank has a technology business called ANZ Operations and Technology in
Bangalore since 1989. In 2008, it employed about 1,800 people in information technology development roles (about 1,100)
and back office and support roles (about 700).
Saying it will redeploy all employees affected by the move, ANZ National had said it was confident of doing so as it adds
800 employees every year in New Zealand. “The staged shift of work over the next 18 months will also help staff [members]
who wish to be redeployed to find a suitable alternative role within the bank. As a result, none of our staff needs to lose their
job,” it had added in its statement. It also clarified that all customer contact roles, including call centre roles, will remain in
New Zealand and Australia.
However, the worker unions were not happy about it. FINSEC, the union representing workers in New Zealand’s finance
industry, had said that ANZ was putting billion-dollar profits ahead of its Kiwi customers and staff. “ANZ National is lead-
ing the race to the bottom for cheap labour in India by proposing to send these jobs offshore,” FINSEC Campaigns Director
Andrew Campbell was quoted as saying in a FINSEC statement.
The Union has asked the bank to make commitments on several fronts, including guaranteeing all affected staff jobs with
pay and conditions equivalent to their previous ones, providing jobs for at least three years, guaranteeing that there will be
no further off shoring in the next three years.
ANZ had said that the rationale behind the job transfers was to ensure better customer service and increased competitive-
ness. The customers, it said, would benefit from a longer 15-hour work window, with Bangalore’s eight hours added to New
Zealand’s eight. “For ANZ, it will ensure we will remain competitive in an increasingly globalized marketplace through our
access to a large pool of high calibre staff,” it had said in a statement.
M01_SING6013_01_C01.indd 2 6/18/10 11:25:38 AM

Industrial Relations:
Evolution and Growth
Industrial relations is a major supporting subsystem of the overall management system. It constitutes an
integral part of human resource development activity of any organization. The study of industrial relations
has evolved over a period of time and has been shaped by the interplay of a number of forces and actors. The
study of industrial relations requires a multi-disciplinary approach.
ANZ is one of the many global corporations dealing with interface relationships within the organi-
zation as well as outside. These relationships become more complex, yet vital for growth and perfor-
mance, as the world progressively moves towards free trade. These relationships have evolved over
a period of time, from simple production units of the post–Industrial Revolution era to the modern
transnational corporations of today. Many players and forces have taken part in shaping the rela-
tionships and these will continue to do so. The unprecedented oil-price hike from around USD 50
to approximately USD 150 per barrel by OPEC in the year 2007–2008 sent the aviation industry
into a tizzy, forcing domestic airlines to cut costs and announce job cuts. And, within six months,
the international oil price dropped from USD 150 to around USD 40, forcing an altogether different
economic scenario that took the industry some time to decipher and, amongst other things, forced
the oil marketing companies in India to face a strike from its managerial staff demanding a hike in
wages. The State and the political party in power had to take stern action to break the strike.
Such measures affect the employers, employee bodies (trade unions), the political parties, the
government and, eventually, the employees themselves. Economic, political and social changes in
any part of the world are now easily transmitted across borders and eventually invade business enti-
ties, socio-political institutions and individual lives in quick time. Against this complex and dynamic
environment, it may be instructive to look at the meaning of industrial relations afresh, trace its
evolution and identify the underlying changes in the emerging response patterns. We shall also
work with different approaches, frameworks and tools to help us understand the actors, factors and
dynamics that shape relationships between employers and employees.
1.1 The Evolution of Industrial Relations

The term industrial relations is generally associated with relations between the employer and the
workmen in a unit or industry. The evolution of the concept is linked to industrialization and the
growing complexity of work organization. As industrial enterprises grew in size and technological
processes initiated a socio-technical dependence, there emerged certain peculiar characteristics that
required an institutionalized rather than an individualized employer–employee relationship. Let us
take a brief look at a few of the special features associated with these changes:
Segmentation (Blue-collar and White-collar Roles): Mass-scale production required that
repetitive tasks be performed with greater efficiency and competence. Work, therefore, got
fragmented into smaller tasks. Those performing these fragmented and repetitive tasks needed
supervision and, thus, the nature of roles within the workplace got classified as those of opera-
tives, supervisors, managers, etc. This segmentation led to what later was classified as “blue-
collared” and “white-collared” workers.
M01_SING6013_01_C01.indd 3 6/18/10 11:25:39 AM

4 Part I Context
Specialization (Horizontal Differentiation): Workers were further classified on the

The changes at work-
place relationships
basis of groups that specialized in a small but distinct nature of task grouping (for exam-
include: ple, fitters, riggers, riveters and painters). The differentiation, from an organizational
Increase in capital– point of view, was horizontal, and later led to what, in modern terms, could be akin to
labour ratio departments or sections. This horizontal differentiation also enabled workers to orga-
Work specialization nize themselves on the basis of specialization or special skill sets at an enterprise level
Fragmentation of work or even at the industry level. This kind of organization had its own impact on work rela-
Repetitive work to tionships not only amongst the members but also with the employer and the industry.
increase efficiency
Fragmentation of work
Hierarchical Levels (Vertical Differentiation): As the differentiation on the hori-
led to formation of zontal dimension increased, there was need for supervision and coordination, which
groups and employees resulted in a vertical hierarchy or vertical differentiation. The different levels thus cre-
and employers ated vertically were responsible and accountable for different tasks in terms of output,
New perspective of an targets, costs, resource utilization, etc. With differentiations along both vertical and
inter-group relation- horizontal dimensions, work relationships became increasingly complex.
ship
Growing sense of A New Relationship Interface: The fragmentation of work and the resulting
insecurity required differentiations—both vertical and horizontal—resulted in increasing complexity in the
a collective effort relationship between employees and employers, and amongst different groups. A range
to counter any
management initiative
of interfaces emerged Having maximized the production up to a given level with the
for retrenchment, technological resources available, the factor multiplication process of gaining through
dismissal, etc. economies of scale was reached. The focus, then, shifted to technological transfor-
mation and innovations. Newer methods of production through newer technologies
demanded different and new knowledge and skill sets. This impacted the security of the
existing job holders because of knowledge and skill obsolescence and their redundancy.
A collective effort for protecting their interests, thus, became a necessity.
The roots of the modern concept of industrial relations can be traced to the immediate after-
math of the Industrial Revolution and the problems that arose due to the growth in indus-
tries in terms of size, variety and volume of production. Employers adopted a mechanistic
approach to work and began to view labour as one of the factors of production. The industries
grew from small competitive business units to business corporations employing thousands of
workers. The relationship between an employer and an employee changed from informal and
personal to a formal and regulated one, and the nature of the employee–employer relation-
ship changed from a private and individualized relationship to a standardized one.
With the employer–employee relationship entering the public domain and impacting
society, formal institutions emerged to regulate the relationship. Trade unions, as mentioned
above, emerged out of a necessity to restore some balance in the relationship between pow-
erful capital and weak labour. Thus, trade unions (and also employers’ associations) flour-
ished, and with it, work relationships moved out of the realms affecting the enterprise or the
labour alone. The complexity of issues relating to the social costs of industrial growth became
increasingly apparent.
Industrial relations was no longer confined to the relation between an employer and an
employee. The collective of workers necessarily had to be factored in, and it became a power
to be dealt with; more so because the interests of employers and employees were largely con-
flicting. The conflict was natural since workers were dissociated from the ownership of the
instruments, materials and other means of production. The origins of the concept of indus-
trial relations lie here. This genesis of the term influenced the general perception for many
years. Conflicting interests and ideological orientations conveyed an adversarial and strife-
torn relationship. Industrial relations, therefore, conveys a subject matter largely related
to the handling of conflicts in the industrial domain. State intervention became necessary
for the creation and maintenance of good relations between workers and the management
once the relationship crossed the purely two-party domain comprising the employer and the
employee, and entered the domain of social and public welfare. The State sought to gain the
cooperation of the two partners in industry supporting economic growth and development
through an improvement in the quality of work life. The State had an obvious stake in this
relationship as an instrument of socio-economic progress.
M01_SING6013_01_C01.indd 4 6/18/10 11:25:40 AM

Industrial Relations: Evolution and Growth 5
Gradually, the term industry was extended beyond economic activity to include all gain-
ful employment, including service under the State. The relationship between the State and its
employees also acquired the characteristic features of the employer–employee relationship
in the industry. This is evident from the strike by government employees to demand better
wages and benefits. Thus, employment in government and public sector enterprises, where
ownership is vested with the State, also came within the scope of industrial relations.
1.2 Definitions of Industrial Relations

The simplest way to explore a subject is to start by looking at ways in which it has been defined.
More Players Get
The reader is advised not to try and memorize the definitions. Rather, the focus should be on Associated
looking at the definitions from the perspective of the players, processes, structures and dynam-
ics that each of the definitions emphasize. The bottom-line is to look at the relationship between Industrial relations
originally implied
the employers and the employees and the forces in environment that shape this relationship. employer–employee
As we go along, we should try to bring out the unique perspective of each definition so we can relations.
assemble our own working definition in the end. When trade unions
started espousing the
The Merriam-Webster Dictionary defines industrial relations as “the dealings or rela- cause of workers, their
tionships of a usually large business or industrial enterprise with its own workers, with activities also came
labour in general, with governmental agencies, or with the public”. This definition to be included in the
appears to point to relationships from the perspective of an organization and limits it to scope of industrial
an industrial or business organization. It suggests a descriptive point of view relating to relations.
an entire range of relationships that an industrial organization may have with the stake- With the State stepping
in to regulate the
holders, including its employees. Does the inclusion of only industrial organizations in relationship for public
the definition mean that the central government employees protesting the anomalies in interest and social
the Pay Commission report is not a subject matter of industrial relations? If we expand welfare, these activities
the scope here to include all organizations, should not a term such as employee relations too got included within
be more appropriate? the ambit of industrial
relations.
The Encyclopaedia Britannica2 defines industrial relations as the “study of human
behaviour in the workplace, focusing especially on the influence such relations have
on an organization’s productivity”. This simple definition points to the existence of only
two players operating in the industry and narrows down the scope from the previous
definition to only relationships between employer and employees. It does not include IR Is
anything about the dynamics and context of the relationship. The simplicity of the defi- A study of the
nition leaves out vital players and processes of the IR. relationship between
employers and
Dale Yoder, in his definition, worked on the above premise but focused on issues ema- employees
nating out of employment, describing “industrial relationship to be the designation of a At an organization,
whole field of relationships which exist because of the necessary collaboration of men industry or a nation
and women in the employment process of an industry”3. Industrial relations describe level
the “relationship between managements, employees or among employees and their orga- State’s role
nizations that characterize or grow out of employment”. Here, the emphases are on all Societal, economic,
kinds of relationships that come into existence because of employment. By implication, political and
trade unions, employers’ associations, State regulation and their impact on and from the technological forces
as context
basic employer–employee relationship would all get included in the definition.
It includes:
䊊 players, their objec-
tives
1.2.1 A Working Definition 䊊 structures
From all the above definitions, we may try to piece together a working definition for our- 䊊 conflicts (origins and
selves. Our working definition must take the following into account: resolutions)
䊊 contexts and their
IR is about relationships. impact
䊊 processes and their
The origin is in the relationship of employment. outcomes.
Employer–employee relationship pertains to all kinds of organizations.
M01_SING6013_01_C01.indd 5 6/18/10 11:25:40 AM

6 Part I Context
Figure 1.1
Industrial relations—a State
pictorial representation.
Employers Employees
Groups of
Relationship
Employees
Employer
Groups
Trade
Unions
Context and
Structure
Rules
There are actors other than the employer and the employees who influence the
relationship.
The relationships are shaped by the actors, structures, rules, law, technology, etc.
The impact of social, economic, political and technological features of the context on
the shaping of these relationships.
Industrial relations, therefore, at its core, is a discipline, that concerns itself with the study of
the relationship between employers and employees at an organization, industry or a nation
level. It also concerns itself with the two-way interaction that the State may have in influenc-
ing the relationship(s). These relationships are shaped in a larger context of societal, eco-
nomic, political and technological forces that are in existence. The study encompasses the
players and their objectives, the structures and their functions, the conflicts and their origins
and resolutions, the contexts and their impact, the “processes” and their outcomes.
Figure 1.1 is a visual representation of our working definition. While this may not be a
rigorous definition of a social scientist, it does capture the essence for a student or a practis-
ing manager. At this stage, keep the visual representation of the definition in mind. We will
explore it further in the later part of the text.
1.3 The Scope of Industrial Relations

1
Key Elements in IR
D erent definitions of industrial relations provide different perspectives from which the
Diff
Relations existing in tterm IR has been looked at. The scope of IR, therefore, should encompass an examination of
industry tthese perspectives. The scope of industrial relations would include:
Relations between:
䊊 unions and man- Relations between employee groups/association or unions and management, manage-
agement ment and the government, unions and government, or between employers and unor-
䊊 unions themselves, ganized employees. It would also include collective relations among trade unions,
management and employers’ associations and the government.
the government, and
unions and govern- The activities relating to the above relationship would entail:
ment
䊊 employers and
䊊 Structuring of labour-management relations and its regulation
employees 䊊 Labour legislative compliance
conflicts in relationship
regulation by the State 䊊 Negotiating work-related contracts
Management
M of industrial relations does not confine itself only to the immediate actions
arising out of the interfaces between the players but may also include a range of proactive
measures for creating synergies in the coming together of capital, labour and technology. It,
M01_SING6013_01_C01.indd 6 6/18/10 11:25:40 AM

BOX 1.1 FOR CLASS DISCUSSION

In October 2008, Jet Airways announced that it would lay-off around 1,000 employees
due to rising international fuel prices. The decision to “lay-off” was triggered due to
the economic environment facing the aviation industry. Jet Airways claimed this to be a
necessary step to retain the economic viability of the company. The protesting employees
got support from the political parties (MNS). The local political parties threatened not to
let Jet Airways fly through Mumbai. The government too expressed its views opposing the
move by the airlines. All this led to a rethink on the action by Jet Airways. The move by
Jet Airways was able to force the government to announce concessions for the aviation
industry.
Analyse the antecedents of the IR climate in the story; the abstractions in the passage above
will come alive in a real-life situation. You may, for example, ask the following questions:
Why did Jet Airways announce retrenchments?
What was the immediate reaction in the environment?
Was this reaction different from a reaction in USA over job losses in the Citi Group?
Why?
Why is retrenchment/lay-off such a big issue in India but not in USA/UK?
Does it have something to do with the state of development of society/economy
in the two countries?
Does it have something to do with the respective values in the two cultures?
Do we have different laws? Why? Who or what gives shape to legislation?
Does our history have any role in shaping the kind of labour legislations that we
have?
therefore, goes much beyond the restrictive interpretation that IR concerns itself mainly with
smoothening the friction at interfaces. Industrial relations is mainly a part of social relations
arising out of employer–employee relationship in organizations. These interactions and the
resultant relationship are, to an extent, regulated by the State. The degree of State interven-
tion would depend on the influence of organized social forces on the prevailing institutions
regulating the employer–employee relationship. Box 1.1 brings to life the points that we have
mentioned here, providing a better appreciation of the subject matter in real life.
Industrial relations must address:
Maximizing individual development Factors influencing IR
Relationship between employer and employees Economic: socialist,

capitalist or mixed
The best fit between the human resources and the environment economy, per capita
income of workers
A literature survey on industrial relations shows that the scope is so broad as to be of little Social: nature and
practical use at the working level. Or, it narrows down the field to such an extent that envi- composition of work-
ronmental and contextual factors get left out. It would be immodest to claim that this book force and their status
straddles across the two extremes and provides the scope for IR. However, since the book is and power in society
biased towards action, after introducing the complexities initially, it gets down to the busi- Institutional:
Government policy,
ness of interpreting these complexities at the field level. At the narrow end, therefore, scope labour legislations,
of IR could be restricted to the following domains: trade unions, and
employer organiza-
Management–union relationship tions.
Employer–employee relationship Political: ideologies
and policies
Relationships amongst various groups of employees Technological: mod-
ernization, automation
Effects of extraneous factors (State, socio-political-economic factors) on workplace and capital structure
relationships.
M01_SING6013_01_C01.indd 7 6/18/10 11:25:41 AM

8 Part I Context
1.3.1 Factors Shaping the Industrial Relations Climate

The industrial relations climate in a country, sector, industry or unit arises from a set of inter-
dependent determinants involving historical, geographical, economic, social, political, legal
and cultural variables. Therefore, an interdisciplinary approach needs to be taken for pro-
moting good industrial relations climate. The various factors could further be categorized as
either institutional or economic. Institutional factors would include industrial policy of the
State, labour laws, social institutions (community, caste, religion, etc.) and systems operating
in the cultural milieu with regard to power and status. Economic factors would be the State’s
level of economic growth, its economic activities, per capita income and human development
indices that determine the quality of workforce.
1.4 Objectives of Industrial Relations

Objectives of industrial relations would have a different focus at different levels, namely, at
the level of an enterprise, an industry or at the level of the State. At another level of analysis,
different actors of the IR equation would provide primacy to their respective perspectives
while spelling out their objectives. As an illustration, objectives of IR at the industry and at
the State level could be as described below:
1.4.1 At the Industry or Enterprise Level

The objectives of industrial relations at the enterprise level appear rather obvious. Let us try
and list them down. These could be:
A healthy relationship between employees and employers
Due regard to interests of labour and management by securing mutual understanding
and trust
An environment free from dysfunctional conflict between the parties
Gains in productivity for mutual benefit
Full utilization of available manpower through minimizing loss of man-hours due to
accidents, strife or absenteeism
Creation of a work environment that reduces attrition
Participative working on principles of industrial democracy
Enhancement in the quality of life of employees
These are only by way of example and we can go on adding to this list. However, instead of
trying to memorize these, it would be useful if the reader asked “why” against each of the
objectives.
o For example, “why is it important for the industry to ensure participative working
“Why”–“Why” Analysis? principles
p of industrial democracy”? Is it there only because it appears a noble idea? Or is it
Why is it important for out
o of some practical reason? Why should it matter to the enterprise to improve the quality
the industry to ensure of
o life of its employees? Reflecting on these questions will give the reader a practical flavour
participative working of
o industrial relations at work. As a prospective or practising manager, the reader should try
principles of industrial and
a develop this ability to focus on the relevant.
democracy?
Is it because it appears a
noble idea?
Is it out of some
1.4.2 At the State Level
1
practical reason? Why The objectives of the State in industrial relations do not appear to be so direct. However, the
should it matter to the SState is concerned with the wholesome socio-economic development of the nation. Industry,
enterprise to improve
the quality of life of its iin that sense, becomes a microcosm of the entire nation. State has a stake in industrial relations
employees? iin as much as it must be in consonance with the larger policies of the State. Industrial relations,
iin that sense, have a direct contribution to the economic progress and social development.
Due to the flux of time and changes in technology, markets, policy regime, etc., distortions
D
M01_SING6013_01_C01.indd 8 6/18/10 11:25:42 AM

may occur in the socio-economic order, and these may directly impact the industrial relations
because of the changes in relationships. The State may have to step in to restore balance. The
State may also seek to facilitate resolution of problems created due to conflicting interests
of the management and the working class through protectionist legislations or restraining
indiscipline and exploitation through a legal system for settlement of disputes. Conversely, to
give boost to economic growth and spur investments so that opportunities for employment
get created, the State may step aside for creation of business-friendly regulations. The IT and
ITES industry are an example where flexibility has been allowed to employers. The process
of establishment of special economic zones (SEZs) could also be a case in point. Should the
State intervene to regulate the IR framework in SEZs? Or allow laissez-faire till its attention is
attracted towards distortions that may creep in the absence of State intervention?
The objective of State intervention in promoting industrial harmony and peace through
good industrial relations is to:
safeguard rights of both labour and management;
enlist cooperation and collaboration from both parties to contribute to industrial
growth;
improve the economic conditions of workers through legislations prescribing
minimum guaranteed wages, welfare benefits and social security through labour
legislations; and
control industrial establishments through regulations in terms of engaging and dis-
engaging employees.
Industrial relations in a country are also determined by the form of political economy. The
USA, Cuba, Japan, European Union and India may all give shape to a particular IR regime
driven, in a large measure, by the forms of political government that each has. The objectives
of the IR for State in each of these countries may have many similarities, but also significant
differences. We will take a detailed look at this in Chapter 3.
1.5 Essential Features of Industrial Relations

The ratio of discussions so far throws up certain features of industrial relations that are com-
mon from any of the perspectives. Let us consolidate this learning before we wade deeper.
i) Industrial relations arise out of an employment relationship.
ii) The IR system sets complex rules and regulations for the participants, viz. employ-
ers, workers and the State to ensure industrial peace and harmony.
iii) The relationship hinges on a cooperative spirit between all partners, thereby empha-
sizing the need for adjustment and accommodation in the interest of growth and
development.
iv) State intervention to prevent and control industrial conflicts and distortions in
socio-economic order by stipulating rules with regard to terms and conditions of
employment through enactment of labour laws and also creation of structures and
institutions to resolve them, in case they arise.
v) Participants in industrial relations include employees and their organizations,
employers and their associations, and the government.
In essence, industrial relations is the relationship between and among three players or actors—
employers and/or their representatives, employees and the employee organization and the
State. It is applicable to all organizations that gainfully employ human capital. Employee
organizations or trade unions build a collective relationship with the employer’s organiza-
tion referred to as “management”. The State machinery, through legislations and interventions,
regulates this relationship. The government agencies influence and condition industrial rela-
tions through statutes (laws), rules and awards of the courts.
M01_SING6013_01_C01.indd 9 6/18/10 11:25:43 AM

10 Part I Context
1.5.1 Conditions for Congenial Industrial Relations

Healthy
H Industrial relations at the workplace, in the main, are a function of a problem-solv-
Features of IR
iing attitude on the part of both the unions and the management. Robust HRM policies and
Arise out of an eeffective implementation create the foundation on which such attitudes can rest. To a large
employment relation-
eextent, openness in communication and confidence in dealing with mutual problems suc-
ship
ccessfully determine the health of industrial relations. The maintenance of smooth industrial
Complex rules and
regulations for the par- rrelations, therefore, should depend on:
ticipants
The existence of strong, well-organized and democratic employees’ unions to ensure
Cooperative spirit
equal bargaining power for protection of employees’ interests relating to wages, ben-
between all partners
efits, job security, etc. Interestingly, a few organizations in the post-liberalization
State intervention to
control industrial economy have shown preference for a “union-less” organization.
conflicts and distortions
The existence of strong and well-organized employers’ unions to facilitate promotion
in socio-economic
order and the maintenance of uniform personnel policies among various organizations
Participants include Belief in the process of settlement of conflicts through negotiation and consultation
employers or
and cultivating a spirit of collective bargaining
management,
employees, employees’ Sound personnel policies that emanate from the business strategy and guide the deci-
organizations, the
sion-making process in the eventuality of any employee relations problem
State
Top management support for industrial relations function and support staff
Creating systems and machineries for employee engagement
Well-trained supervisors who understand the implications of building harmonious
relations at the workplace, and avoidance of any managerial practice that could stim-
ulate conflicts
A systematic effort to institutionalize a culture of mutual trust, respect and understanding
1.5.2 Principles for Promoting Healthy Industrial Relations

SSound industrial relations will be based on the following fundamental principles:
The maintenance of
sound IR needs:
i) Basic competence on the part of the employers and the trade unions to deal with
their mutual problems freely, independently and responsibly.
Strong, well-organized
and democratic unions ii) The employees and their organizations (trade unions) and the employers and their
for balance of power organizations must have faith in resorting to collective bargaining and, if necessary,
Strong employers’ should seek help from State agencies in resolving conflicts and disputes. There should
organization be an underlying faith in the effectiveness of the “process”, structure and the system.
Belief in cooperative
collective bargaining iii) Employees (and trade unions) and employers (and their associations) must have
Sound HR policies the realization that they are interwoven into the larger socio-economic fabric of the
Sound preventive systems nation/society and must be willing to associate with the State and its agencies while
Management support evaluating the general, social, public and economic measures affecting the employ-
to IR function ers and the workers.
Well-trained IR staff/
supervisors
Systematic effort
at building a
1.6 Participants of Industrial Relations System
1
collaborative culture and Dynamics of Their Participation
The “actors” in the industrial relations are one set of variables. These actors are not mono-
lithic structures but have sub-structures within them. For example, “employer” may comprise
managers at different hierarchical levels or functional areas or divisions. Similarly, “employ-
ees” may be seen as comprising those belonging to a department, grade, craft or skill. Or, they
may be represented by their union or unions affiliated to different political ideologies. The
State may be represented by the various agencies of legislature, executive and the judiciary.
M01_SING6013_01_C01.indd 10 6/18/10 11:25:43 AM

Figure 1.2
LEGISLATURE A schematic interplay
amongst the main
E Protective
Performance/ variables in IR.
Compensation
X
E
C Employees Employees
U and Groups and Groups
WELFARE JOBS WELFARE
T Representing Representing
I Employees Employees
V Regulatory (Terms
E Regulatory (Rights) and Conditions of
Employment)
JUDICIARY
The industrial relations system comprises different sets of participants or actors, which
influence one another and the system. The degree of influence that each has is a variable. So,
if we look at each of the three actors as variables, this is how they may influence the system:
i) Workers and Their Organizations (Trade Unions or Associations): The trade
unions have a protective role of safeguarding workers’ interests, regulatory func-
tion of ensuring implementations of statutes and non-violation of their rights.
The Trade Unions Act, through an enabling process of registration, provides sta-
tus and authority for the power vested in them through support of member co-
workers. This power is used for negotiating wage increases, better benefits and
service conditions, concessions, more amenities and welfare schemes. The struc-
ture of workers’ organization or trade unions differs from country to country.
ii) Employers’ Organization: The organization is represented through officials designated
in the organization structure for coordination of activities relating to administering
employment benefits, regulating terms and conditions of employment and providing
welfare and social security benefits. This coordination is done through a graded, hier-
archical structure through a formal communication channel of orders and directives.
The style and manner in which employer organizations get work and regulate the terms
and conditions of employment affects the industrial relations of the unit.
iii) Government: The government or State machinery regulates the relationship between
workers’ organizations and employers’ organizations through statutes or legislations,
the judiciary—labour courts and industrial tribunals—and an executive machinery
that lays down rules, procedures, gives awards and monitors them.
The dynamics of participation and inter-relationships amongst the three variables is
depicted in Figure 1.2.
The economic structure and policies, and also the political ideology of the government
in power determine the role and influence of the three participants stated above. For exam-
ple, with liberalization and globalization of the Indian economy, the trade unions (in the
organized sector) appear to be less active than before. This issue would be discussed at length
in the subsequent chapters.
1.7 Industrial Relations: Perspective

and Approach
By now, we have had glimpses of the complexity of industrial relations—the participants,
contextual factors, objectives and dynamics of relationships. From purely an academic point
of view, the subject has been approached from different perspectives in order to provide a
M01_SING6013_01_C01.indd 11 6/18/10 11:25:44 AM

12 Part I Context
comprehensive framework for studying it. It is important to know the various approaches so
that the breadth, depth and complexity of the subject are appreciated.
The purpose here is to outline and compare main academic theories and approaches by
which industrial relations institutions, structures and processes are analysed. The theories
that individuals develop about industrial relations are attempts to construct logically con-
sistent ways of understanding and explaining social behaviour and real-life activities in this
complex field. The main approaches are discussed below.
1.7.1 The Unitary Approach

The essence of the unitary approach of IR is that every work organization is an integrated
and harmonious whole, existing for a common purpose. It is assumed, under this approach,
eeach employee identifies with the aims of the organization and with its ways of working.
Under the unitary Those holding this view aver that there is no conflict of interest between those supplying
approach to industrial
relations, work organiza- financial capital and their representatives on the one hand, and those contributing their
tions are viewed as: llabour and skills on the other. By definition, the owners of capital and labour are joint
partners to the common aim of efficient production, good profit and high pay in which
p
Unitary in structure
eeveryone in the organization has a stake. There cannot, therefore, be two sides in the indus-
Unitary in purpose
ttry. Managers and employees are the part of the same team. This “team” is provided strong
Having a single source
of authority lleadership from the top to keep it working and to ensure commitment to the tasks.
Having a cohesive set This implies a paternalistic approach towards the employee or an authoritarian one. It
of participants aassumes team spirit across the organization and, at the same time, recognizes managerial
aauthority. In short, work organizations are viewed as:
Unitary in structure
Unitary in purpose
Having a single source of authority
Having a cohesive set of participants
As a result, industrial relations is viewed as based on mutual cooperation and harmony of
interest between the management and the employees within the organization. Collective bar-
gaining and trade unions are, therefore, perceived as being anti-social and anti-managerial
mechanisms, since acceptance of two opposed and competing interest groups within the
enterprise, in the persons of management and union representatives, only precipitates and
crystallizes unnecessary and destructive industrial conflict between what in effect are viewed
as two non-competing, cooperative parties.
The unitary approach of industrial relations is predominantly managerially oriented in its
inception, in its emphasis and in its application. Indeed, it is a theoretical perspective with which
many managers and employers identify because it reassures them in their roles as organizational
decision makers and legitimizes the acceptance of their authority by subordinate employees.
The Neo-unitary Approach. A variant of the Unitary Theory, Neo-Unitary Theory,
appears to have emerged in some organizations since the 1980s. It builds on existing uni-
tary concepts but is more sophisticated in the ways it is articulated and applied within
enterprises. Its main aim seems to be to integrate employees, as individuals, into the com-
panies in which they work. Its orientation is distinctly market-centred, managerialist and
individualist. By gaining employee commitment to quality production, customer needs and
Many post-liberalization organizations prefer to have a “union-less” environment. In fact,

one of the KRAs of the HR manager is to prevent unionization. Discuss and arrive at a
consensus regarding the management’s philosophy in this case. List down all pros and
cons that implementation of this philosophy may have on the relationships within the
organization.
M01_SING6013_01_C01.indd 12 6/18/10 11:25:44 AM

job flexibility, employers embracing this frame of reference have expectations of employee
loyalty, customer satisfaction and product security in increasingly competitive market condi-
tions. Companies adopting a neo-unitary approach try to create a sense of common purpose
and shared corporate culture—they emphasize to all employees the primacy of customer
service, they set explicit work targets for employees, they invest heavily in training and man-
agement development, and they sometimes provide employment security for their workers.
The personnel management techniques used to facilitate employee commitment, qual-
ity, output and worker flexibility include performance-related pay, profit sharing, harmoni-
zation of terms and conditions, employee involvement, and an HRM function, rather than
a personnel management function. The emphasis of neo-unitary approaches to industrial
relations (also, sometimes referred to as “employee relations”) is that committed, motivated
and well-trained people are the key to corporate success.
1.7.2 Systems Approach: The Dunlop Model

John T. Dunlop is credited with the application of the Systems Approach to industrial relations.
Systems essentially comprise four processes: input acquisition, input transformation, output
and feedback. When a system is self-contained with these processes, it is termed as a “closed
system”, that is, it has nothing to do with the environment in which it exists. An “open system”
(see Figure 1.3), in contrast to a “closed system”, exists in the context of its environment. If we
consider an organization to be an “open system”, then we recognize the fact that this exists
in a context called environment. The organization influences its environment as well as gets
influenced by the environment. The environment may comprise factors like social, political,
technological and others. It (the organization) depends on the environment for essential sup-
plies and it also depends on the environment to receive the outputs. The environment also
influences the various processes for acquisition, transformation and delivery of outputs.
Dunlop visualized industrial relations to be a systemic construct, that is, industrial rela-
tions systems as a sub-system of society. “An industrial relations system, at any one time in its
development, is regarded as comprised of certain actors, certain contexts, an ideology, which
binds industrial relations systems together and body of rules created to govern the actors at
the workplace and work community.”4
Let us try to understand the Dunlop’s System Model (see Fig. 1.4) from the output that
industrial relations seeks to deliver. “Creation of rules”, according to Dunlop, is the “output”
that an IR “system” seeks to create. “Rules”, in this context, comprise:
Rules governing all forms of compensation
The duties and performances expected of workers including rules for maintaining
discipline
Rules defining rights and duties of employers and employees (including legislations,
terms of collective agreements)
Figure 1.3
An open system.
INPUT TRANSFORMATION OUTPUT
Environment
M01_SING6013_01_C01.indd 13 6/18/10 11:25:45 AM

14 Part I Context
Procedures for establishing rules

Procedures for application of rules, etc.
If this be the output from the IR system, then what would be the “input”, “transformation”
and “feedback” processes and how do they interact with each other?
The IR system involves three groups of “actors”:
1. Managers and their organizations
2. Workers and their organizations
3. “State” and its agencies concerned with “workplace”
The actors function not in isolation but in an environmental context:
1. The technical context of the workplace, e.g., how the work is organized, what the state
of technology is, whether it is labour or capital intensive
2. The market context or the revenue-related context, e.g., product demand, market
growth, number of competitors, margins, profits, etc.
3. The “power” context, that is, how “power” is distributed amongst the three “actors”
The actors engage with each other on the basis of some common ideology; there is a mini-
mum common denominator to the respective ideologies. The workers may hold a common
belief that they must strive to have a greater say in the running of business or to improve the
standard of living. The employer’s ideology may include the cost-effective use of resources,
continuous growth, a productive work force, etc. In an IR system, it is the common denomi-
nator of ideologies that binds and integrates the system. For example, all three hold a belief
that employees are entitled to demand for a minimum quality of living, that discussion and
bargaining must be the preferred way to solve disputes, that the State does have a limited but
clear role as an arbiter in certain matters.
The actors, in given contexts, establish rules for the workplace and the work community
including those governing the contacts among the actors in an industrial relations system. This
network of rules and procedures decides their application in particular situations. The systems
approach of Dunlop emphasizes the concern for order through systems, procedures, rules and
regulations for containment of conflict.
Dunlop’s System Approach and model has had its share of criticism, the most important
one being that it focuses more on the structural aspects of the model and leaves out the pro-
cesses leading to conflict. It also does not dwell upon the human aspects of the actors and
their behaviour. The approach is predominantly an analytical one rather than a descriptive
one, in the process, leaving out the genesis, handling and resolution of conflict. Fifty years
since, when the model was proposed, perhaps the industrial landscape has changed and there
may be need to include new actors to the model.
Nevertheless, Dunlop’s Model has been one of the most popular theoretical frameworks.
It helps explain why particular rules are established in particular IR systems and how and
why they change in response to changes affecting the system. Changes can be brought about
through historical, political, sociological and economic changes. Given this framework, we
can appreciate the interlinks between the actors, and how rules that govern their actions are
set in place. The actors do not operate in isolation. The emphasis of the systems model on the
diverse forms of industrial relations rules that exist, the different rule-making methods, and
the ways in which rules are applied is a useful contribution to the understanding of industrial
relations practices. Thus, the industrial relations in a labour-intensive industry would be dif-
ferent from that in a capital-intensive or knowledge industry.
1.7.3 The Conflict Approach

There are two major approaches that have tried explaining industrial relations based on con-
flict inherent in the society.
M01_SING6013_01_C01.indd 14 6/18/10 11:25:45 AM

Figure 1.4
Inputs Transformation Outputs Dunlop’s model.
Reproduced with
Actors permission from J.
(Employers, T. Dunlop, Industrial
Employees, State) Relations Systems (Boston,
• Bargaining MA: Harvard Business
Contexts • Conciliation Press, 1958).
(Technological, • Arbitration Rules
Market, Power) • Legislation
• Judgements
Ideology
Input
General Environment
PLURAL ISM . It is the existence of more than one ruling principle. The pluralist approach
Pluralism
to IR accepts conflict as inevitable but containable through various institutional arrangements.
Work organizations are microcosms of society. Since society comprises a variety of individuals Pluralism is a belief in the
and social groups, each having their own social values and each pursuing their own self-interests existence of more than one
ruling principle, giving rise
and objectives, it is argued that those controlling and managing work enterprises, similarly, have to a conflict of interests.
to accommodate the differing values and competing interests within them. It is only by doing The pluralist approach
this that enterprises can function effectively. Industrial relations between employers and unions to IR accepts conflict as
and between managers and trade unionists, by this view, are an expression of the conflict and the inevitable but containable
power relations between organized groups in society in general. As such, it is claimed, industrial through various institutional
arrangements.
conflict between managers and their subordinates has to be recognized as an endemic feature of
work relationships and has to be managed accordingly. This approach, called “pluralism”, accord-
ing to Clegg, “emerged as a criticism of the political doctrine of sovereignty—that somewhere in
an independent political system, there must be a final authority whose decisions are definitive.
Not so, said the pluralist. Within any political system, there are groups with their own interests
and beliefs, and the government itself . . . depends on their consent and cooperation. There are
no definitive decisions by final authorities: only continuous compromises”5.
A plural society, in other words, has to accommodate to different and divergent pressure
groups to enable social and political changes to take place constitutionally. This is achieved A plural society has to
accommodate to different
through negotiation, concession and compromise between pressure groups, and between and divergent pressure
many of them and the government. Witness the Nano controversy in West Bengal with many groups to enable social
interest groups negotiating with each other. This negotiation of conflicting interests was and political changes to
acceptable and expected. take place constitutionally.
It is from this analysis of political pluralism that industrial relations pluralism is derived. This is achieved through
negotiation, concession
Just as society is perceived as comprising a number of interest groups held together in some and compromise between
sort of loose balance by the agency of the State, so are work organizations viewed as being pressure groups, and
held in balance by the agency of management. between many of them and
The pluralist and post-capitalist analyses of industrial relations emphasize the virtues of the government. Industry
collective bargaining as separate but conflict-resolving and rule-making processes. can be visualized as a
microcosm of society with
Critics of pluralism point out that those working within the pluralist framework implic- conflict inherent between
itly accept the institutions, principles and assumptions of the social and political status quo as different groups.
unproblematic.
POST- CAP ITAL ISM . Further, another (sub) approach within the conflict theorists
proposes that the nature of class conflict has substantially changed from that suggested by
Marx in his nineteenth-century analysis. In Marxist theory, class conflict is perceived as being
synonymous with industrial conflict and political conflict. Under market capitalism, Marxists
M01_SING6013_01_C01.indd 15 6/18/10 11:25:45 AM

16 Part I Context
argue, the capitalists or the owners of the means of production are identical with the ruling
class in industry and politics, while wage-earners, owning only their labour resources, are
relatively powerless in industrial relations and in politics. Capitalists are the social elite and the
proletariat are the socially weak. What, then, has changed according to post-capitalist analy-
sis? It is argued, we now live in a more open and socially mobile society compared with the
class-based social divisions associated with nineteenth-century and early twentieth-century
capitalism. The widening of educational opportunity, the democratization of politics, and the
growth of public sector industry, for instance, have opened up recruitment to a whole range of
sought-after roles in society, including those within industry, politics, education, the profes-
sions, the arts and so on, which would have been inconceivable a hundred years ago.
The distribution of authority, property and social status in society is more widely dif-
fused than it was in the past. The positions that individuals occupy in the authority structure
of industry, for example, do not necessarily correlate with their positions in the political
structure or with their social standing in the community.
Above all, these theorists believe that the institutionalization of conflict in industry not
only has decreased in intensity but also has changed its form. Several changes seem to be of
particular importance in this respect:
The organization of conflicting interest groups itself
The establishment of representative negotiating bodies in which these groups meet
The institutions of mediation and arbitration
Formal representations of labour within the individual enterprise
Tendencies towards and institutionalization of workers’ participation in industrial
management
Thus, it is argued, the emergence of trade unionism, employers’ organizations and collective
bargaining, together with union representation at enterprise and workplace level, now effec-
tively regulating the inevitable social conflicts seems improbable; third-party intervention,
usually through State agencies providing conciliation and arbitration services, is not available
to provide workable remedies. By this analysis, extending worker participation in managerial
decision making, as happens in board-level worker representation in countries like Denmark,
the Netherlands and Germany, is seen as a logical progression in institutionalizing the power
relations between managers and subordinates at work. Post-capitalist society, in short, is viewed
as an open society in which political, economic and social power is increasingly dispersed and
in
i which the regulation of industrial and political conflict are of necessity dissociated.
Post-capitalist society Industrial conflict theory remains a major theoretical approach to industrial relations.
is viewed as an open Yet,
Y whilst collective bargaining fits easily into a pluralist theory, consultation or joint prob-
society in which political, lem
l solving does so to a lesser extent. For this reason, it is useful to distinguish between
economic and social
power is increasingly “hard”
“ pluralism and collective bargaining, which are conflict centred, and “soft” pluralism
dispersed and in which and
a joint consultation, which are problem centred.
the regulation of industrial
and political conflict are
of necessity dissociated. 1.7.4 Weber’s Social Action Approach
1
Social
S action theory in industrial relations emphasizes the individual responses of the social
actors, such as managers, employees and union representatives, to given situations. It con-
trasts with systems theory, which suggests that behaviour in an industrial relations system is
explicable in terms of its structural features. Social action theory is pre-eminently associated
with the studies of Max Weber. According to Weber, action is social “by virtue of the sub-
jective meaning attached to it by the acting individual . . . it takes account of the behaviour
of others and is thereby oriented in its course”. He insists that in order for social actions to
be explained, they must be interpreted in terms of their subjectively intended meanings,
not their objectively valid ones. If only observable behaviour is examined, it is argued, the
significance and the value that individual actors place upon their behaviour are likely to be
misinterpreted.
M01_SING6013_01_C01.indd 16 6/18/10 11:25:45 AM

Social action, then, is the behaviour having subjective meaning for individual actors, with
Social action is behaviour
social action theory focusing on understanding particular actions in industrial relations situ- having subjective
ations rather than on just observing explicit industrial relations behaviour. This contrasts with meaning for individual
systems theory, which regards behaviour in industrial relations as reflecting the impersonal actors, with social action
processes external to the system’s social actors over which they have little or no control. theory focusing on
The fundamental point is that social action emerges out of the meanings and circum- understanding particular
actions in industrial
stances attributed by individuals to particular social situations, thereby defining their social relations situations rather
reality. Through interaction between actors, such as that between personnel managers and than on just observing
union officers; line managers and personnel specialists; and union representatives and their explicit industrial relations
members, individuals as well as those having an element of choice in interpreting their own behaviour control.
roles and in acting out their intentions, also modify, change and transform social meanings for
themselves and for others. The major difference between a social action approach in examin-
ing behaviour in industrial relations and a systems approach is this: the action theory assumes
an existing system where action occurs, but cannot explain the nature of the system, “while the
systems approach is unable to explain satisfactorily why particular actors act as they do”. The
first views the industrial relations system as a product of the actions of its parts; the other aims
to explain the actions of its parts in terms of the nature of the system as a whole.
1.7.5 The Gandhian or Trusteeship Approach

Mahatma Gandhi was the main proponent of the trusteeship approach with truth, non-violence
and non-possession as ideologies. Basically, a business enterprise has the inherent responsibil-
ity to its consumers, workers, shareholders and the community. The responsibilities are mutual.
A business enterprise is meant for good for all and not just for profits. According to Gandhi,
conflicts are inevitable in an industrializing society, but labour and capital must learn to peace-
fully coexist for mutual benefit, and for the community at large. He, however, recognized the
worker’s right for a strike (peaceful non-cooperation) subject to the following conditions:
i) Workers should seek redress of just and reasonable demands through collective action.
ii) Trade unions should decide to go on strike taking ballot authority from all workers,
and remain peaceful using non-violent methods.
iii) Workers should avoid strikes to the extent possible.
iv) Strikes are to be the last resort.
v) Workers should avoid formation of philanthropic organizations.
vi) Workers should take recourse to voluntary arbitration where direct settlement fails.
1.7.6 The Marxian or Radical Approach

The Marxist interpretations of industrial relations are not strictly theories of industrial rela-
tions per se. Marxism is, rather, a general theory of society and of social change with implica-
tions for the analysis of industrial relations within capitalist societies.
The starting points for the Marxist analysis of a society are the assumptions that: social
change is universal; class conflict is the catalytic source of such change; and these conflicts, The contradictions that
which arise out of differences in economic power between competing social groups, are rooted persist between those who
in the structures and institutions of the society itself. The conceptual method by which Marxists privately own the means
examine the dynamic character of social relations is described as “dialectical materialism”. of production in the
pursuit of profit, on the
The contradictions that persist between those who privately own the means of produc- one hand, and those who
tion in the pursuit of profit, on the one hand, and those who have to sell their labour for have to sell their labour
wages to survive, on the other, are perceived as being irreconcilable in the context of a class- for wages to survive, on
based bourgeois society. the other, are perceived
For Marxists, moreover, unlike pluralists and unitarists, political and class conflicts are as being irreconcilable in
the context of a class-
synonymous with industrial conflict since “the capitalist structure of industry and of wage- based bourgeois society.
labour is closely connected with the pattern of class division in society”. Thus, the conflict
M01_SING6013_01_C01.indd 17 6/18/10 11:25:46 AM

BOX 1.3 INDUSTRIAL RELATIONS IN ASIA PACIFIC
Industrial relations in countries, sub-regions and regions have been influenced by a variety
of circumstances and actors such as political philosophies, economic imperatives, and the
role of the State in determining the direction of economic and social development, the influ-
ence of unions and the business community, as well as the legacies of colonial governments.
Over several decades, IR in many industrialized market economies of the West, and also in
Australia and New Zealand, in the Asia-Pacific as well as in the South Asian countries paid
less attention to competitiveness than did the younger “discipline” human resource manage-
ment. IR fulfilled the function of providing employees with a collective voice, and unions with
the means to establish standardized terms and conditions of employment not only within
an enterprise but also across an industry, and, sometimes, across an economy. This was
achieved through the freedom of association, collective bargaining and the right to strike.
Similar results were achieved in the South Asian sub-region where political democracy, and,
sometimes, socialist ideology, provided enormous bargaining power and influence on leg-
islative outcomes to even unions with relatively few members. A different IR regime emerged
in some of the Southeast and East Asian economies driven by competition in export markets
and different political systems bearing little resemblance to the values underpinning Western-
style democracies.
During the past decades, labour relations were often viewed by Asian governments as
a means of minimizing conflict, preventing union agitation, or as in the case of India and
Sri Lanka, of controlling employers and winning votes. Conflict resolution was achieved
through dispute prevention and settlement mechanisms external to the enterprise, such as
conciliation, arbitration and labour courts. In South Asia, the objective was also achieved
through restrictions and prohibitions on the freedom of action of employers in matters such
as termination of employment, closures and even transfers of employees. On the other
hand, several Southeast Asian countries resorted to measures to restrict trade-union action
and to control unions, as well as to avoid union multiplicity. In South Asia, while the focus
of IR was on equity from the point of view of workers and unions, in Southeast Asia, the
emphasis was on economic efficiency and less on worker-protection laws. Low unioniza-
tion in many Asian countries, strong governments in Southeast Asian countries and the
Republic of Korea, and perceptions that unions can be potential obstacles to a particular
direction of economic development, led to a relative neglect of IR. Moreover, hierarchical
management systems and respect for authority, which have mirrored the external social
system, have been inconsistent with consultation, two-way communication, and even with
the concept of negotiating the employment relationship. Japan, however, was an excep-
tion where, since the 1960s, workplace relations and flexibility facilitated by enterprise
unionism dominated IR in the larger enterprises. Australia and New Zealand have tra-
ditionally focused on centralized IR, though the emphasis has radically changed in New
Zealand during this decade, and is changing in Australia.
Globalization has led employers to push for less regulation of IR, less standardization
of the employment relationship, and a greater focus on the workplace as the centre of
gravity of IR. Employers as well as some governments are viewing IR from a more strategic
perspective, i.e., how IR can contribute to and promote workplace cooperation, flexibility,
productivity and competitiveness. It is increasingly recognized that how people are man-
aged impacts on an enterprise’s productivity and on the quality of goods and services,
labour costs, the quality of the workforce and its motivation.
Source: Sriyande Silva, “The Changing Focus of Industrial Relations and Human Resource
Management”, paper presented at the ILO Workshop on Employers’ Organizations in
Asia-Pacific in the Twenty-First Century, Turin, Italy, 5–13 May 1997.
M01_SING6013_01_C01.indd 18 6/18/10 11:25:46 AM

taking place in industrial relations between those who buy labour and those who sell it is seen
as a permanent feature of capitalism.
Class conflict permeates the whole of society and is not just an industrial phenomenon. In
the same way, trade unionism is a social as well as an industrial phenomenon. Trade unions are,
by implication, challenging the property relations whenever they challenge the distribution of
the national product. They are challenging all the prerogatives, which go with the ownership of
the means of production, not simply the exercise of control over labour power in industry.
There are both short-term and long-term implications in the Marxist analysis of bour-
geois society and of the class-based structure of capitalist industrial relations. Within society,
for example, the class struggle between capital and labour is regarded as being continuous—
even where trade unions are absent. It takes place, it is argued, because capitalists and pro-
letarians seek to maintain and to extend their relative positions in the economic power
structure enabling “surplus value” to be distributed between them. Such conflict is seen to be
unremitting and unavoidable. Neither employees individually nor trade unions collectively
can be divorced from the realities of these power relations, either by disregarding them or by
succumbing to the manipulative techniques of employer persuasion.
A trade union organization is viewed as the inevitable consequence of the capitalist exploi-
tation of wage labour. The vulnerability of employees as individuals invariably leads them to
form collective groups or unions in order to protect their own class interests. Collective bargain-
ing and militant trade unionism, however, cannot resolve the problems of industrial relations in
a capitalist society. They merely accommodate temporarily the contradictions inherent within
the capitalist mode of production and social relations. Indeed, “the starting point of any realistic
analysis must be the massive power imbalance between capital and labour. This derives from
the very fact that the productive system is, in the main, the private property of a tiny minority
and that profit is the basic dynamic, Confronting this concentrated economic power, the great
majority who depend on their own labour for a living are at an inevitable disadvantage”6.
More significantly, industrial relations become not ends in themselves, but a means to an
end—the furtherance of the class war between capital and labour towards establishment of a
classless society. Trade unionism and industrial relations conflict are merely symptoms of the
inherent class divisions within capitalism.
The article in Box 1.3, by Silva, briefly traces the evolution of industrial relations regime
in various regions of the Asia Pacific. You can see how the multitude of factors go into shap-
ing and the evolution of industrial relations. Transition towards a free trade regime and a
clamour for “inclusive growth” in growing economies like India, social and cultural factors
all combine to provide a melting pot for continuous evolution of industrial relations.
SUMMARY
In the process of managing human resources in industry, The scope of industrial relations includes labour relations,
certain relationships get established between employers and employer–employee relations, group relations, and
employees. community or public relations.
These relations are generally known as industrial relations, Industrial relations are shaped by socio-economic,
which, due to its complexity and differing perceptions and psychological and political factors. These relations are complex
interest, are also associated with State intervention. and multifaceted, and to understand them from differing
perspectives, a multi-disciplinary approach is desirable.
Industrial relations refer to the interrelations between
three main actors—employees and their organizations, The various industrial relations perspectives include the
management and the government. systems model of Dunlop, the pluralist approach, Weber’s
social action approach, the Marxian radical and the
The primary objective of industrial relations is to establish
Gandhian approach of peaceful coexistence.
and maintain good and healthy relations between the two
partners in industry—labour and management. Dunlop analysed industrial relations systems as a sub-
system of society. The actors, in given contexts, establish
Industrial relations are influenced by the existing and
rules for the workplace and the work community,
emerging economic, institutional and political factors in the
including those governing the contacts among the actors
region in which it is located.
in an industrial relations system.
M01_SING6013_01_C01.indd 19 6/18/10 11:25:48 AM

20 Part I Context
Weber’s perspective focused on the power struggle in which with divergent interests over which the government tries to
all the actors in the industrial relations system are caught up. maintain some kind of dynamic equilibrium.
The unitary perspective emphasizes the organization as The radical perspective emphasizes the organization as a
a coherent and integrated team unified by a common microcosm and replica of the society within which it exists;
purpose. The pluralist perspective emphasizes organization and industrial conflict and trade union actions are just a
as an amalgamation of separate homogeneous groups—a means towards the establishment of a classless society.
miniature democratic State composed of sectional groups
KEY TERMS
employers’ organizations 11 post-capitalist society 16 trusteeship 17
industrial relations 3 social action theory 16 unitary theory 12
pluralism 15 systems model of IR 13 workers’ organizations 11
REVIEW QUESTIONS
1 Considering different definitions attributed to industrial 5 In the current day industrial scenario, what, according to
relations, which definition in your opinion is most you, are the necessary conditions for a healthy industrial
appropriate in the current context of global organizations? climate?
2 How does the concept of industrial relations differ from the 6 Taking into consideration different perspectives and
concept of human resource management? approaches advocated for industrial relations, can you
advocate or build a theoretical model for industrial relations?
3 Explain the roles of the different participants in the
Give reasons and arguments to support your answer.
industrial relations system.
7 What, in your opinion, is the future of industrial relations?
4 What are the functions of the industrial relations department
of an organization and the activities to be taken up by the IR
specialists in the department?

1 Critically examine the role of three main players of IR in the evolve in the coming years? What major challenges do you
current Indian context. How do you think their roles would think is there before each one of them?
D E B AT E
1 State intervention/regulation in industrial relations must be 2 Theories of industrial relations do not really matter. It is
removed to enable the industry to become internationally the reality of the workplace that determines the outcome of
competitive. industrial relations.
Increase in Working Hours
Amitabh Saha is Regional Personnel Manager (North) of Indian 40 staff members. Every branch has a recognized union. The
Steel Company. Indian Steel Company is an integrated steel region is headed by a regional manager and Amitabh reports
manufacturer that manufactures 5 million tones of finished steel to him administratively.
per annum at its plant located in Jharkhand. The finished steel
The regional manager calls Amitabh and tells him that there is
products are then dispatched to the countrywide steel warehouses
a need to extend the working hours from the existing 7 hours to
from where they are delivered to customers against orders.
8.5 hours. This is necessary because of increased competition
The northern region of ISC has warehouses in the states of and, therefore, need for a customer service better than
J&K, Haryana, Punjab, Himachal, Delhi, Rajasthan. These competitors. He also wants to reduce the number of holidays in
warehouses are managed by a branch manager and around all the branches from the existing 12 days to 4 days.
M01_SING6013_01_C01.indd 20 6/21/10 4:04:21 PM

1. How do you propose that Amitabh go about his talks? to the labour movement. But the Gurgaon event spurred
corrective action on the part of the state government, itself
2. Who are the people and agencies with whom he would need
goaded by an acutely embarrassed United Progressive
to interact?
Alliance (UPA) leadership, as well as public opinion. HMSI
3. What has forced this change? Can you identify the was forced to take back all the workers, including those
contextual factors here? dismissed and suspended. Although it is true that the
workers had to give an undertaking that they would raise
4. Do you think this move of the management is justified?
no fresh demands for a year, but the management implicitly
Why? Will the workers look at the issue in the same way?
conceded the illegitimacy of its own anti-worker actions
Will the government be involved?
during May and June, by agreeing to pay the full salary for
Violence at Honda Motorcycles and Scooters, India that period.4
The workers’ struggle at the Honda Motorcycles and Scooters 1. Please do a background research to bring out full facts of the
India Ltd (HMSI) in Gurgaon, capped by an extraordinarily case.
brutal attack on them by the Haryana police, constitutes the first
2. Discuss the following:
labour landmark of the twenty-first century in India. The police
action of 25 July has brought labour issues—absent from the The main players in the episode
media’s radar-screen for a decade or more—back into the
The “issues” from the perspectives of each of the players
national limelight in ways not seen for a long time. Perhaps, the
only comparable events are the Mumbai textile workers’ strike Which of the various approaches to industrial relations, in
of 1982–1983, one of the longest strikes in the world, and the your opinion, best describes the dynamics of the episode?
1995 self-immolation in Delhi by a textile-mill worker driven to Why?
despair by prolonged unemployment and near-starvation.
Discuss the systemic failure with focus on the three actors
However, there are two major differences. First, the earlier of the industrial relations system.
episodes ended in both personal tragedies and setbacks
NOTES
1 Adapted from Deepshikha Monga, “ANZ National to move 5 H. A. Clegg, “Pluralism in Industrial Relations”, British
500 processing jobs to Bangalore Worker Unions Slam Journal of Industrial Relations, November 1975, pp. 309.
Move, Set Slew of Conditions”, The Economic Times, 19 April
6 R. Hyman and R. H. Fryer, “Trade Unions—Sociology
2008, http://www.articlearchives.com/company-activities-
and Political Economy, Processing People—Cases in
management/company-strategy-outsourcing/1716320-1.html.
Organizational Behaviour” in John B. Mckiunlay, Holt,
2 Encyclopædia Britannica Online, 15th ed., s. v. “industrial Rinchart and Winston <publishing details>,1975, pp 160.
relations”.
7 Adapted from: Praful Bidwai, “For a ‘New Deal’ on Labour”,
3 Dale Yoder, Personnel Principles and Policies: Modern Frontline, 22: 17, 2005 http://www.flonnet.com/fl2217/
Manpower Management, Englewood Cliffs:Prentice-Hall, 1959. stories/20050826003310900.htm
4 J. T. Dunlop, Industrial Relations System, Cambridge, Mass.:

Harvard Business Press,1958.
SUGGESTED READING
Clegg, H. A. The Changing System of Industrial Relations in Great Kuruvilla, S. and C. S. Venkatratnam. “Economic Development
Britain (Oxford, UK: Blackwell, 1979). and Industrial Relations: The Case of South and Southeast Asia”,
Industrial Relations Journal, March 1996.
Dunlop, J. T. Industrial Relations Systems (Boston, MA: Harvard
Business Press, 1958). Reports of the First and the Second National Commission on
Labour (1969, 2002)
ILO 2004, “A Fair Globalization—Creating Opportunities for
All” in Report of the World Commission of Social Dimensions Venkatratnam, C. S. Industrial Relations (New Delhi: Oxford
of Globalization, Vol. 27, Issue 1, pp 9–23. Report of the World University Press, 2006).
Commission of Social Dimensions of Globalization
Yoder, Dale. Personnel Management and Industrial Relations (New
Jerome, Joseph. Industrial Relations, Towards a Transformational Delhi: Prentice Hall of India, 1967).
Process Model (New Delhi: Global Business Press, 1995).
M01_SING6013_01_C01.indd 21 6/18/10 11:25:48 AM

chapter two
2.1 The System of Industrial Relations in India After reading this chapter, you should be able to:
2.2 The Historical Perspective • Trace the evolution of the system of
2.3 Trends in Industrial Relations Management industrial relations in India
2.4 Conclusion • Appreciate the context of the ongoing
paradigm shift from industrial relations to
employee relations
• Identify the concerns that need to be
addressed by employers, unions and the
government in the current competitive
global environment
• Have a better understanding of the
problems related to labour reforms
From Industrial Relations to Employee Relations
Raman Shenoy has recently taken over as Assistant Vice President (People Engagement) of a large ITES organization in
Delhi. The company is the global hub for the management of business processes for clients from across the world. Raman’s
company employs more than 20,000 people and has won several major awards for employee and customer satisfaction.
When queried on how he managed industrial relations or industrial action or trade-union activism in the company, this is
what Raman had to say:
“Because of our proactive policies towards employees, we almost do not face any industrial relations issues. Trade unions
are non-existent. Most of our employees, because of their excellent compensation, “job content” and working conditions,
do not fall within the purview of any labour legislation. Gone are the days of the old-economy companies where you had
to deal with unionized employees, industrial action, compliance with labour legislations. In the new economy, we cannot
afford to function with the legacies of the old economy.”
A few of the proactive measures towards employee relations that Raman listed out for his organization are:
Employee relations SPOCs (single points of contact) are aligned to each process and provide touch points for employees.
All issues, grievances and concerns of employees are accorded top priority by respective managers and the ER team.
Regular and scheduled one-on-one, skip meetings, both by operations and ER, help to address the issues as soon as
possible.
Open houses are held for each process once every quarter wherein the top management presents highlights of perfor-
mance, policies, and answers questions.
Reward and recognition is a part of the work life of all employees. Almost every month, R&R schemes are rolled out,
offering attractive prizes and gifts for better performance and productivity.
There are annual budgets assigned to facilitate critical employee-related activities—ER, R&R, team fund, parties,
celebrations, etc.
The retention of employees is the key challenge for management. Even employees are aware of this and try to exploit this.
Raman says the above covers the entire range of issues pertaining to employee relations. He says it is a sea change from his
previous company, an aluminium-manufacturing company with the legacy “IR system” of management. There is no union
to deal with and hardly any regulatory compliance. The state government, in order to ensure that the new industry thrives in
a globally competitive environment, is very flexible with granting exemptions if the provision exists in the law. The market
forces have ensured that very good care is taken of the employees.
M02_SING6013_01_C02.indd 22 6/18/10 11:30:10 AM

Industrial Relations in India
The system of industrial relations in India has evolved since the early part of the twentieth century. The
State has played an important part in this evolution, both directly and indirectly. The colonial history,
International Labour Organization, economic policies, political movement, etc. have helped shape the
industrial relations system in India.
While Raman’s experience may not be true across different sectors of the industry, it does indicate the
coexistence of totally different frameworks of relationships amongst the players of IR across different
industries/regions across the country. On the other extreme, there have been instances where the rela-
tionship deteriorated to the extent of widespread and brutal violence. Since the diversification of the
economy post 1991, it is but to be expected that the future trends would reflect heterogeneity of work-
place contexts. Some parts of the Indian economy are still rural/agricultural, some dominated by tradi-
tional manufacturing, while the others comprise high-tech manufacturing and modern service sector1.
Is this how relationships will be managed across the organized industries? How is it different from the
other periods in our development history? What are the forces and initiatives that have helped shape
relationships at the workplace, and have these forces changed over a period of time? Will there be some
kind of homogenization in the quality of employer–employee–State relationship shaped by the prevail-
ing economic and social forces? Will the State leave the industries in the organized sector to regulate
their own relationships and focus its attention on the unorganized sector? From a colonial past to the
Freedom struggle, to the building of a nation and an economy, the industrial relations system has crossed
many bends in the road. In this chapter, we trace the journey of the industrial relations system in India to
understand the nuances of the current set up, and go on to answer these questions.
“The Indian government considers its responsibility to maintain industrial peace and harmony
in order to safeguard the interests of workers and employers. The State has, therefore, assumed pow-
ers to regulate labour relations. It has, since Independence, encouraged mutual settlement, collective
bargaining, conciliation, voluntary arbitration and adjudication as the principal means of resolving
industrial conflicts. It has also recognized trade-union rights of workers and their promotion through
democratic means and has intervened through legislative action for enhancing living and working
conditions of workers and promoting social security”.2 This statement captures the approach of the
State, so far, towards industrial relations in the country since Independence. In going through the
chapter, we will familiarize ourselves with the evolution and meaning of the various terms that have
been used in the statement. The statement provides a useful reference for examining the mosaic of
industrial relations in the country through history, and for creating a platform from which one can
attempt to comprehend how the future may unfold.
2.1 The System of Industrial Relations in India

The institutional framework of the industrial relations system in India has been largely influenced by
its colonial history. The government’s role has been primarily to control industrial conflict; and, hence,
has been regulatory and predominated by labour legislations. The legislations provide the preventive
machinery that attempts to avoid sources of conflict by prescribing safety, hygiene, occupational-health-related
M02_SING6013_01_C02.indd 23 6/18/10 11:30:11 AM

24 Part I Context
p
provisions to be ensured by employers in addition to compliance with the specified procedures
Industrial Dispute
rregarding leave, dismissal and layoffs. The Industrial Disputes Act (1947) puts checks in place
Industrial dispute has rrelating to layoffs, retrenchments and closures—potential sources of major conflicts. The trade
been defined under the unions
u have strong political affiliations and have the right to strike, provided due notice (where
Industrial Disputes Act,
1947. Stated simply, it required)
r is given. The industrial disputes settlement machinery includes conciliation, arbitration
is a dispute between an aand adjudication. Strikes could be called off if a request for third-party intervention through
employer and (a group cconciliation officers is sought by either party. The failure to resolve conflicts through either
of) employees on matters cconciliation or mediation may lead to the parties either seeking voluntary arbitration or
relating to employment or rreferring to the government for resolution through compulsory arbitration or adjudication
conditions of employment.
bby courts or tribunals. The labour legislations, thus, follow a protectionist philosophy to
rreduce potential sources of conflict, while the dispute settlement mechanism attempts to
resolve conflicts.
The industrial relations policy of India has, by and large, been worker centric, driven
Settlement Machinery
bby the socialist principles of the economic policy that predominated the post-Independence
Once an industrial pperiod till the 1980s. Social security provisions were made mandatory for all employers
dispute arises, the ID Act
(1947) has provisions for
tthrough provident fund schemes, thereby making them bear some part of the social-policy
a three-tier machinery ccosts.
(conciliation, arbitration The industrial policy and import substitution controls provided by the government pro-
and adjudication) for the ttected both public- and private-sector firms from international competition. However, this
settlement of the dispute. pprotectionism led to inefficiencies and workforce rigidities, reflected in the preference for
eemployment in public sectors and the government, and reluctance towards labour-displacing
ttechnologies, rationalization of labour, labour-cost-control strategies and productivity-based
iincentive schemes.
Forces Shaping the IR
System in India
The Trade Unions Act of 1926 provided a means to organize labour, and recognized
tthat need of labour organizations by the State. This provided a fillip to the growth of trade
The colonial history
uunions in the country, more so after Independence. The unionization of the work force, how-
The government’s role
in IR—preventive and
eever, has been largely restricted to the organized sector.3 A large number of unions are affili-
regulatory aated to regional or national federations, the major ones being the Indian National Trade
India being a founder UUnion Congress, the All-India Trade Union Congress, the Centre of Indian Trade Unions,
member of ILO tthe Indian Workers’ Association, and the United Trade Union Congress. These federations,
The political move- iin turn, have affiliations to various political parties. Political affiliations, many times, have led
ment for Freedom and tto industrial action in furtherance of larger political goals rather than immediate enterprise
labour participation oor industry-level issues agitating the minds of the workforce. The political affiliation of trade
“Worker-centric” State uunions led to the multiplicity of unions and leaders, often emerging from outside the labour
policies
fforce.
The protection of
domestic industries—
With no legal provision requiring a sole bargaining agent, the participatory system
import substitution oof industrial relations that should have emerged, given the above-mentioned practices
Multiplicity of TUs and aand a democratic political system, have not yet been strongly established. Labour is in
political affiliation of tthe Concurrent List, which allows different states to enact their own industrial relations
TUs llaws, required also because of the differing institutional histories of different states. For
Labour in Concurrent eexample, trade unions in Mumbai (Bombay) have historically been quite different in
List ttheir orientation towards collective bargaining relative to trade unions in comparison to
sstates such as West Bengal, which have a strong CITU influence. The MPIR Act requires a
ssole bargaining agent and, hence, Madhya Pradesh has had a more successful collective-
bargaining practice than other states. In addition, there are also institutional differences
aacross industries.
Sole Bargaining Agent
Some of the basic characteristics of the industrial relations system in India are as follows:
A provision making it
binding for a recognized i) The industrial relations climate is controlled through the regulatory provisions
union alone to bargain on in labour laws and the settlement machinery comprising conciliation officers and
behalf of all employees boards, voluntary arbitration and labour courts and industrial/national tribunals for
adjudication.
ii) The regulation of labour relations by the State has been primarily through legisla-
tions that have been greatly influenced by the British labour laws. Though the laws
promulgated are extensive, they are confounded with serious ambiguities and gaps
M02_SING6013_01_C02.indd 24 6/18/10 11:30:12 AM

Industrial Relations in India 25
such as procedures for the recognition of unions and collective bargaining with the
sole bargaining agent or the recognized union.
iii) Indian unions are restricted to the organized sector of industry. Most unions have
political affiliations. This has generated multiplicity of unions operating in an indus-
try, which has fostered external leadership rather than encouraging the emergence
of leaders from the rank and file of workers.
iv) State intervention has continued to prevail since the time of Independence, although
in the last decade, it has shown a declining trend.
v) There is a marked difference in the labour management relations in different states
and also between organized and unorganized sectors, public and private enterprises,
multinationals and domestic companies.
vi) There is no national industrial relations policy. The Industrial Relations Bill and
the report of the National Commission on Labour were just steps in this direction.
Similarly, there is no national wage policy, and also no clear evidence of a pattern in
terms of the operation of the industrial relations institutions.
vii) Collective bargaining is more a matter of optional practice with no statutory
backing.
viii) The changes brought in by the new economic policy have resulted in changes in the
industrial relations structure. The heterogeneity of the emerging workforce has made
it difficult to establish standards or uniform IR practices in the Indian industry.
2.1.1 The Role of the State

In a developing country like India, State intervention has been deemed necessary because:
The policy on various
i) The labour organizations, however numerous, were relatively weak. The relationship aspects of industrial
has been one of profound distrust and, hence, the government has to play a major relations has tradition-
role in taking an interventionist role in maintaining industrial relations. ally evolved through a
consensual approach
ii) Labour situations, at times, lead to lawlessness, making it necessary for the State involving all the three
to intervene through industrial relations policies, which are likely to ensure social players—the State,
the employers and the
justice and industrial peace. employees. Several
iii) The federal nature of the constitution has made it imperative for the State to inter- institutions for tripartite
consultations have been
vene in labour matters to ensure smooth and continuing production. The fact that created.
labour and industrial relations is on the Concurrent List means that the centre has
to enact certain laws that are applicable to certain sections of labour throughout the
country.
iv) The Directive Principles of the State policy enjoins upon the State to establish a
welfare State and to look after the interests of the weakest sections of the society,
including the handicapped.
2.1.2 The Labour Policy

The labour policy in India has evolved from the needs expressed in the policy objectives
in relation to industrial development. Policies and practices have been created, modified
and developed on the basis of joint consultations, at different levels, amongst the three
players—the employers, the employees and the government. A measure of consensual
outcome of these consultations found expression in legislation and other measures of
the government. The common denominator of the views of the three parties, in a way,
came to represent the national policy on labour and industrial relations, operating on a
voluntary basis.
M02_SING6013_01_C02.indd 25 6/18/10 11:30:13 AM

26 Part I Context
2.1.3 Tripartism in India’s Industrial Relations System

Consultations amongst Consultations
C amongst the three actors of industrial relations, namely, the employer, the
the three actors of eemployee and the State, since the initial years, have been the cornerstone of IR policy in
industrial relations namely IIndia. To give shape to this element of policy, a number of bodies and fora were created.
employer, employee and Every major piece of policy initiative has emerged out of consultations amongst the three
E
the State, has since the parties. The consultative machinery has been operationalized through a large number of tri-
p
beginning years, has been
a cornerstone of the IR partite bodies set up by the government to provide a forum to discuss and deliberate upon
p
Policy in India. To give llabour issues, policies and legislations. Notable among these are:
shape to this element of
policy, a number of bod- i) Indian Labour Conference (ILC)
ies and fora were created. ii) Standing Labour Committee (SLC)
‘Tri-Partism’, therefore, is
an important feature of iii) Committee on Conventions
the IR System and Policy
in India. iv) The Industrial Committees
The need and evolution of these tripartite bodies are based on the recommendations of ILO
((itself tripartite in nature) and the Royal Commission on Labour (Whitley Commission) in
1931. The rules and procedures of the Indian tripartite consultative machinery are largely in
tune with the recommendations of the ILO Committee on Consultation and Cooperation.
The Indian Labour Conference (ILC) and Standing Labour Committee (SLC) are the most
important constituents of tripartite bodies that play a vital role in shaping the IR system of the
country. The representatives of the workers and employers are nominated to these bodies by the
central government in consultation with the all-India organization of workers and employers.
The highest tripartite mechanism in the country, the Indian Labour Conference and
The important tri-partite
bodies are: tthe Standing Labour Committee, were set up in 1942 “to advise the Government of India on
matters brought to its notice”. The objectives set before these two tripartite bodies at the time
m
Indial Labour
of their inception were:
o
Conference
Standing Labour i) to promote uniformity in labour legislation;
Committee
Committee on ii) to lay down a procedure for the settlement of industrial disputes; and
Conventions
iii) to discuss all matters of all-India importance as between employers and employees.
Industrial Committees
The union labour minister is the ex-officio chairperson of the ILC and the SLC. The agenda
for
f the ILC and the SLC meeting is finalized by the labour ministry after taking into account
all the issues raised before it by the member bodies. The demand that the conference should
frame its agenda and have an independent secretariat was not accepted by the government.
According to the National Commission on Labour, these two bodies have immensely
India, being a founder
member of the ILO, contributed
c to the attainment of the objectives set before them. The tripartite deliberations
has been influenced helped
h to reach a consensus on the statutory minimum wage fixation (1944), the introduction
in a large measure by of
o health insurance (1945), the enactment of the Employment Standing Order Act, 1946, the
the deliberations at the I
Industrial Disputes Act, 1947, Minimum Wages Act, 1948, the Employees’ State Insurance
ILO. The Committee on
A 1948, the Employees’ Provident Fund Scheme, 1950, and the Employees’ Provident Fund
Act,
Conventions, a tri-partite
body, examines the ILO A 1947, to name a few. The range of subjects discussed at the forums of ILC/SLC has been
Act,
conventions and recom- l
large ranging from social, economic and administrative matters concerning labour policy.
mendations for ratification A
Apart from these, other subjects under their purview include workers’ education, workers’
by India. p
participation in management, training within the industry, wage policy, wage boards, the code
o discipline, criteria and procedures for the recognition of unions. Though the recommenda-
of
t
tions of the tripartite bodies are of an advisory nature, the government, the workers and the
employers attach considerable weight to their recommendations. Though the government is
one of the three parties with the union labour minister being the ex-officio chairperson of ILC,
the government has made it clear that the recommendations of the ILC are nothing more than
just that—recommendations—and, therefore, not binding on the government.
When initially constituted, it was expected that the ILC would meet at least once a year and
the SLC whenever necessary. The ILC met regularly till the early 1970s. Thereafter, the meetings
have become few and far between, almost one meeting in three to four years. A major reason
M02_SING6013_01_C02.indd 26 6/18/10 11:30:13 AM

for infrequent meetings can be attributed to the question of representativeness of the three
participants, namely, the government, the employers and the employees.
The Committee on Conventions is a three-member tripartite committee set up in 1954
with the objective:
i) to examine the ILO conventions and recommendations for ratification, which will
be discussed in the last section of this chapter, and
ii) to make suggestions for implementation of ILO standards
The industrial committee was set up to discuss specific problems of industries and also delib-
erate on the legislative proposals that are put forth by different parties.
2.1.4 The Impact of the ILO on Indian Labour Relations

The impact of the activities of the ILO on the Indian labour scene is two-fold. First, the ILO
was the principal source for the labour legislation in India through the ratification of the ILO
standards. The principles of these standards are incorporated into the existing labour laws.
Second is the effect of Article 3 of the Constitution of the ILO, which provides for the nomi-
nation of non-government delegates and advisors to the International Labour Conference.
The nomination of these non-government delegates from amongst employers and employees
meant an effort at organizing the employers and employees’ bodies so that they may repre-
sent in the annual events at the ILO.
RAT IF ICAT IO N P RO CED U R E S O F T H E I LO STANDAR D S. The ILO

standards are analogous to treaties requiring competent national authority within a period
of one year or eighteen months. In India, the treaty-making power is within the competence
of the government of India. The power to enact and implement legislation lies in the hands of
the parliament. The Director General of the ILO sends a certified copy of the convention to
all member States. Since labour is in the Concurrent List of the constitution, the government
of India dispatches the convention to the state governments, to the ministers of labour of the
union, as well as to the all-India organizations of workers and employers, inviting their views
regarding the desirability and practicability of giving effect to these standards. A statement
of action is drawn up; taking into account the comments received, it is considered by the
union cabinet and is placed before the parliament, where the proposals are discussed from all
aspects. Copies of the statements are forwarded to the International Labour Office, the state
government, and the workers’ and the employers’ organizations. Follow-up action, by way of
ratification of conventions, is taken up subsequently.
The Tripartite Committee of India was set up to draw up a programme of implementa-
tion of the ILO conventions. This committee makes a detailed scrutiny of these ILO conven-
tions. It is on the recommendation of this committee that India ratifies conventions and The ILO has made a
recommendations. In case where the committee has not ratified a particular instrument, it total of eight conventions
focuses on the reasons for non-ratification. as Core Conventions
or Human Rights
Conventions. India has
THE RAT IF ICAT IO N O F CO NVE NT I O NS BY I ND I A . There was no ratified four of these con-
important labour legislation in India up to 1919. But the establishment of the ILO and the ventions, namely:
continuous association of our country with its organization have greatly influenced labour Forced Labour
legislation. India has so far ratified 30 conventions. According to these conventions, the Convention (No. 29)
labour legislations have been adopted or amended in our country. Of the 30 conventions Equal Remuneration
ratified by India, 11 were ratified prior to 1930, 4 between 1930 and Independence, and 15 Convention (No. 100)
after Independence. Abolition of Forced
The eight Core Conventions of the ILO (also called “fundamental/human rights conven- Labour Convention
tions”) are: (No. 105)
Discrimination (Emp-
1. Forced Labour Convention (No. 29) loyment Occupation)
Convention (No. 111)
2. Abolition of Forced Labour Convention (No.105)
M02_SING6013_01_C02.indd 27 6/18/10 11:30:14 AM

28 Part I Context
3. Equal Remuneration Convention (No.100)

4. Discrimination (Employment Occupation) Convention (No.111)
The above four have been ratified by India.
5. Freedom of Association and Protection of Right to Organized Convention (No.87)
6. Right to Organize and Collective Bargaining Convention (No.98)
7. Minimum Age Convention (No.138)
8. Worst Forms of Child Labour Convention (No.182)
These four are yet to be ratified by India4
Consequent to the World Summit for Social Development in 1995, the above-mentioned con-
ventions (Sl. No. 1 to 7) were categorized as the Fundamental Human Rights Conventions or
Core Conventions by the ILO. Later on, Convention No. 182 (Sl. No. 8) was added to the list.
The government of India has its own compulsions in not having ratified all the ILO
conventions. For one, ratifying would mean taking action to give effect to the conventions
through bringing out suitable legislations.
2.2 The Historical Perspective

Prior to Independence, during the early part of the twentieth century, the industrial relations
philosophy was mainly laissez-faire and selective intervention (National Commission on
Labour, 1969). The main driver was to allow the industry to produce, and any interventions
by the government were largely in furtherance of this objective. Growing unrest of labour,
the Bolshevik Revolution in Russia and the formation of the ILO were stimuli to usher in a
few changes through legislation. The Trade Disputes Act (1929) was, therefore, enacted and
it provided for government intervention in industrial disputes. The Royal Commission on
Labour (1931) recommended a few changes in the Act. In the mean time, the Bombay Trade
Disputes (Conciliation) Act was enacted in the year 1934. This Act provided for:
A compulsory recognition of the union by the employer
The right of the workers to get represented by a union or a government official
The setting up of industrial courts
The certifying of standing orders
The prohibition of strike/lock outs in certain circumstances
On recommendations of the Royal Commission and lessons drawn from the Bombay Trade
Disputes Act, the Trade Disputes Act was amended in 1938.
The Government of India Act of 1935 put labour in the Concurrent List, which meant both
the centre and the state were competent to legislate. With a view that a modicum of uniformity
in legislations of the centre and different states was desirable, a need was felt for a tripartite
consultation at an apex level. Indian Labour Conference and Standing Labour Committee were
a response to this felt need of the employer, the employees and the government.
The period during the World War II witnessed turbulence in the industrial relations situ-
ation. The exploitation of labour for furthering the war effort, a fall in earnings due to price
rise, political influence of the Freedom struggle, all combined to make a volatile labour situa-
tion. The Defence of India Rules, at this time, introduced a structure for resolution of indus-
trial disputes through the process of adjudication. Many of the provisions of the Defence of
India Rules were later incorporated in the Industrial Disputes Act of 1947.
The policy objectives of the elected government after Independence were to protect the
labour of exploitation and to ensure industrial peace and harmony. The initial phase was a
paternalistic protective phase.
M02_SING6013_01_C02.indd 28 6/18/10 11:30:14 AM

2.2.1 The Protective Phase (1947–1956) The protective phase wit-

This phase of industrial relations was characterized by providing “rights” to citizens by the nessed the enactment of
the Industrial Disputes Act
adoption of the constitution and the Industrial Truce Resolution to restrain from work stop- (1947), the Constitutional
pages. The constitutional provisions provided for certain rights that ensured every citizen be Provisions, the Industrial
treated equally on principles of economic and social justice. The articles in the constitution that Truce Resolution, the First
are relevant for initiation of the protective phase of industrial relations are outlined in Box 2.1: Five Year Plan, etc.
The reader would do well to go through the constitutional provisions relating to labour. This
would help in understanding the genesis of various legislations and government-led initiatives.
The Industrial Truce Resolution, which was the outcome of the ILC of 1947, required
labour and management to agree to maintain industrial peace and prevent any work stoppage
during the next three years to facilitate industrial development. The implementation of this
truce resolution was facilitated by a central advisory council covering the entire field of indus-
try with committees under each for each industry, supported by provincial advisory boards
and committees for each major industry at the state level. The Industrial Policy Resolution of
1948 reserved the government right to undertake new development in six basic industries,
viz, coal, iron and steel, aircraft and shipbuilding, telephone and telegraph, mineral and oil
production, which were taken up in the public sector. In addition, arms and ammunition,
atomic energy and rail transport were made state monopolies.
On the legislative front, the legal provisions for regulating industrial relations were
embodied in the Industrial Disputes Act, 1947, which sought the prevention and the settle-
ment of industrial disputes in all industries through conciliation, arbitration and adjudica-
tion. The act also provided for the establishment of permanent machinery for settlement of
disputes by the appointment of conciliation officers, industrial tribunals, labour courts and
making settlement/awards given by them binding on both parties. In addition, the Labour
Relations Bill of 1950 introduced the principle of compulsory collective bargaining, but
lapsed with the dissolution of the parliament. However, the concept introduced a movement
towards a non-legal industrial relations of voluntary bipartite negotiations and collective bar-
gaining, which later came to be known as the Giri Approach as it was advocated by V. V. Giri,
the then labour minister.
The principle of protectionism was followed through in the First Five Year Plan, which,
aimed at bringing about an all-round development of the country, set certain targets to be
achieved in the field of production. It was, therefore, considered essential that industrial/
economic development should progress smoothly during the planning era. The implementa-
tion of the targets necessitated industrial peace, that is, no strikes, no lockouts, no stoppages
of work so that production can go on unhampered. Even though the focus of the First Five
Year Plan was agriculture, as far as industry was concerned, it spelled out the following:
i) Workers’ right of association, organization and collective bargaining to be recog-
nized as the basic premise on which mutual relationship could be built.
ii) Employer–employee relationship to be based on satisfaction of mutual economic
needs
iii) Closer association between trade unions and employers’ representatives at various
levels—unit, industry, regional and national level
iv) Strengthening the legal machinery for settlement of disputes by arbitration or adju-
dication in the form of tribunals and courts manned by experts
v) Setting up norms and standards to govern the relations and dealings between
employers and employees and for the settlement of industrial disputes through tri-
partite bodies like the Indian Labour Conference, the Standing Labour Committee
and the Industrial Committees for particular industries
vi) In case of differences between management and labour, the Plan recommended that
the board of directors must have a few people who understand labour problems and
understand their point of view.
M02_SING6013_01_C02.indd 29 6/18/10 11:30:14 AM

BOX 2.1 CONSTITUTIONAL PROVISIONS RELATING TO LABOUR
Fundamental Rights
Article 14: The State shall not deny to any person equality before the law or the equal
protection of the laws.
Article 19: All citizens shall have the right:
(a) to freedom of speech and expression;
(b) to assemble peaceably and without arms;
(c) to form associations or unions;
subject to some reasonable restrictions laid down by the law.
Article 21: No person shall be deprived of his life or personal liberty except according to
procedure established by law.
Directive Principles of State Policy
Article 38: (1) The State shall strive to promote the welfare of the people by securing and
protecting as effectively as it may a social order in which justice, social, economic and
political, shall inform all the institutions of the national life.
(2) The State shall, in particular, strive to minimize the inequalities in income, and endeavor
to eliminate inequalities in status, facilities and opportunities, not only amongst individu-
als but also amongst groups of people residing in different areas or engaged in different
vocations.
Article 39: The State shall, in particular, direct its policy towards securing:
(a) that the citizens, men and women equally, have the right to an adequate means of
livelihood
(b) that the ownership and control of the material resources of the community are so
distributed as best to subserve the common good
(c) that the operation of the economic system does not result in the concentration of
wealth and means of production to the common detriment
(d) that there is equal pay for equal work for both men and women
(e) that the health and strength of workers, men and women, and the tender age of
children are not abused and that citizens are not forced by economic necessity to
enter avocations unsuited to their age or strength
Article 41: The State shall, within the limits of its economic capacity and development,
make effective provision for securing the right to work, to education and to public assis-
tance in cases of unemployment, old age, sickness and disablement, and in other cases
of undeserved want.
Article 42: The State shall make provision for securing just and humane conditions of
work and for maternity relief.
Article 43: The State shall endeavour to secure, by suitable legislation or economic orga-
nization or in any other way, to all workers, agricultural, industrial or otherwise, work, a
living wage, conditions of work ensuring a decent standard of life and full enjoyment of
leisure and social and cultural opportunities and, in particular, the State shall endeavour
to promote cottage industries on an individual or cooperative basis in rural areas.
Article 43A: The State shall take steps, by suitable legislation or in any other way, to
secure the participation of workers in the management of undertakings, establishments or
other organizations engaged in any industry.
M02_SING6013_01_C02.indd 30 6/18/10 11:30:14 AM

In terms of systems, the First Five Year Plan prescribed:

The First Five Year Plan
i) A need for a systematic “grievance procedure” to be helped by having elected shop Prescribed:
stewards A systematic grievance
procedure
ii) The importance of work committees as the “key to the system of industrial Work committees as
relations”. the key
iii) A need for a single bargaining agent over as large an area of industry as possible. A single bargaining
agent
iv) The public sector to set itself as a model employer, in terms of wages, working condi- The public sector to be
tions and welfare facilities a model employer
The protectionism phase was marked with the provision of minimum wages and conditions
of labour, uniformity in labour laws, initiation of facilitative machineries like grievance pro-
cedures and work committees to deal with man-management issues.
2.2.2 The Consolidation Phase (1956–1965)

While the first phase saw a number of legislative interventions by the State, the second phase
saw a host of initiatives based on “moral” exhortations. This was also the period of the Second
Five Year plan with the focus shifting to rapid industrialization. Under the stewardship of
Gulzari Lal Nanda, a slew of Codes was introduced in industrial relations as a non-statutory
moral regulation for a better relationship between labour and management. This was based
on the Gandhian trusteeship approach discussed in Chapter 1, with three important contri-
butions made in the forms of the Code of Conduct, the Code of Discipline, and the Draft
Code of Efficiency and Welfare.
THE CO D E O F D ISCIP L IN E I N I ND UST R Y. When the government shifted

its emphasis from legislation to voluntary agreements, it tried to bring home to the parties (the
government, the workers and the employers) an awareness of their obligations under the labour
legislations, and also create in them an attitude of willing acceptance of their responsibilities. It
was in this context that the question of discipline in the industry was discussed at length by the
Indian Labour Conference held in July 1957. The following general principles were laid down:
There should be no lockout or strike without notice.
No unilateral action should be taken in connection with any industrial matter.
There should be no recourse to go-slow tactics.
No deliberate damage should be caused to plant or property.
Acts of violence, intimidation, coercion, or instigation should not be resorted to.
The existing machinery for settlement of disputes should be utilized.
Awards and agreements should be speedily implemented.
Any action that disturbs cordial industrial relations should be avoided.
In order to consider these aspects and the relevant matters, a tripartite sub-committee was
appointed, on whose report, recommending a code of discipline was accepted with certain
modifications. The Code of Discipline in Industry, thus evolved, was accepted in March 1958
after due discussion, and came into force on 1 June 1958 (The full Code of Discipline in
Industry is given in Appendix III).
The Code of Discipline is a set of self-imposed and mutually agreed voluntary principles
of discipline and relations between the management and the workers in the industry. It is a
code of conduct both for the workers and the management, and provides for the voluntary
and mutual settlement of disputes, through mutual negotiations, voluntary arbitrations and
conciliations without the interference of an outside agency. While it refrains both the parties
from unilateral action, it induces them to make the best use of the existing machinery for the
M02_SING6013_01_C02.indd 31 6/18/10 11:30:16 AM

32 Part I Context
settlement of disputes. Thus, the code compels both the parties not to indulge in any strike
or lockout without exploring the avenues for voluntary, mutual settlement of any possible
misunderstanding or disputes. In a nutshell, it lays emphasis on the atmosphere of mutual
regard and respect.
The fairly successful results of the planning process initiated after Independence created
a need for the consolidation of the process of economic growth and development through
implementation, for better results. The consolidation process was done by laying greater
emphasis on bipartism and tripartism for increased association between labour and manage-
ment. The Second Five Year plan recommended the following:
i) The avoidance of disputes at all levels, including the last stage of mutual negotiations
and conciliation
ii) The importance of preventive measures for achieving industrial peace
iii) An increased association between management and trade unions through forma-
tion of joint councils and a proper demarcation of the functions of workers’ com-
mittees and trade unions
iv) A need for the avoidance of indiscipline in industry for which a Code of Discipline
was agreed upon in 1958
v) Suggested restrictions on the number of outsiders who serve as office bearers of
unions
vi) A need for union recognition to make collective bargaining effective, and the repre-
sentative union to have the sole right to take up matters with the management
vii) The use of voluntary arbitration in case of unresolved disputes rather than compul-
sory adjudication
The central government amended the Industrial Disputes Act accordingly to include a new
provision, Section 10 A, providing for such a reference of disputes to voluntary arbitration.
On the social security front, the EPF Act was extended to cover industries and commercial
establishments having 10,000 workers or more and the contribution enhanced from 6.25 to
8.33 per cent. The ESI Act proposed to extend coverage to the workers’ families.
This phase can, therefore, be characterized by a consolidation process wherein worker
interests were retained and the government’s control initiated through the philosophy of
bipartism and tripartism.
During the Second Plan period, two more initiatives were started, that of Joint
Management Councils and Worker’s Training. Joint Management Councils were introduced
in 23 units, with a purpose to jointly discuss issues related to production and productivity.
At the time of the Chinese aggression, the second Industrial Truce Resolution was passed
on 3 November 1962, which emphasized:
The need to maximize production and the need to exercise restraint by employers and
workers
That no interruption of work be allowed
That all disputes should be settled by voluntary arbitration, especially those related to
dismissal, discharge and retrenchment of workers
That unions should discourage absenteeism, and negligence on the part of the workers
Joint emergency production committees to be set up
The policy initiatives during the second and the third plant periods can, thus, be summarized
as follows:
The introduction and improvement of the three codes introduced in 1958, to give a
more positive orientation to industrial relations
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Active implementation of workers’ education programmes

The second phase had
Enlarging the coverage of the ESI scheme to 3 million workers’ families by extending two Five Year Plans. The
the coverage of the Act to establishments employing 20, from the earlier 150 policy initiatives taken up
in this period reflected a
A national safety council set up in 1966 new labour policy that
aimed towards the pre-
Model Grievance Procedure based on the principle of bipartite forums vention and settlement of
disputes. Prevention was
Scheme for workers’ participation through joint councils facilitated by modifica-
tions in labour legisla-
The resolution of conflicts by voluntary arbitration tion and the creation
Central Wage Boards of mutually beneficial
relations through workers’
The establishment of norms for wage determination participation and joint
councils. This established
Thus, the approach for the consolidation used was through bipartite and tripartite machinery the bipartism spirit in
promoted by the State. the industrial relations
climate.
2.2.3 The Conflict-ridden Interventionist Phase

(1966–1976)
The fragmentation of the Indian polity made it difficult for tripartite agreements to be arrived
at by consensus. Political affiliations of trade unions brought interference of political parties
to a state level. This resulted in labour turbulence, and with non-Congress governments in
most states, the practice of tripartism declined. The much greater polarization in national
politics resulted in clearer conflict lines being drawn not only among the unions, but also
between labour and management. The spirit of cooperation that was sought to be introduced
through the various voluntary arrangements (Code of Discipline et al.) all disappeared from
the IR scenario; they were but a faint memory. “When these arrangements were discussed
in the tripartite fora, the actors could not disagree openly with such lofty ideals. The moral
appeal, though outstanding, soon waned. In retrospect, it appears the actors agreed to these
because they were merely voluntary and non-adherence did not entail any sanctions.”5 In the
1970s, the government was forced to increasingly step in for securing industrial peace since
the machinery in existence was proving to be inadequate.
The political uncertainty created economic insecurities and the declaration of emer-
gency created a more volatile industrial relations climate. Despite the decline in industrial
activity and social militancy, this period was crucial in labour history as it created a platform
to evaluate and initiate labour reforms that would facilitate economic revival and growth. An
important development during this phase was the appointment of National Commission on
Labour in 1967, with Justice P. B. Gajendragadkar as its chairman. Although the recommen-
dations could not be implemented, but till date, there has not been a more comprehensive
assessment of the industrial relations, and the recommendations are valid even today.
The Fourth Five Year Plan (1969–1974) came after three years of a plan holiday and
The third phase or the
coincided with the emergency period. This was a period when labour rights and privileges conflict-ridden phase
were withdrawn and the right to strike suspended from June 1975. The employers’ rights to was precipitated by the
closure were restricted but not that of lockouts. A national apex body was set up as a bipartite fragmentation of political
consultative forum to resolve industrial relations problems supported by similar bodies at the parties, different parties
state level. This forum issued guidelines to resolve industrial relations problems that affected in power in the centre
and in the states and the
production and productivity, but in practice, were not very successful. In addition, national onset of the emergency.
industrial committees were set up for some major industries to deal with their specific prob- This period also saw the
lems. The Fourth Plan continued with the industrial policy of the previous years and made report of the first National
only a brief reference to industrial relations, according importance to the growth of a healthy Commission on Labour
trade-union movement for better labour-management relations. Renewed emphasis was in 1960. With increasing
strife, the government’s
placed on collective bargaining and settlement of disputes through voluntary arbitration. role became increasingly
It recommended summary powers to labour courts and that workers’ participation through interventionist.
joint councils be extended to the plant level.
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34 Part I Context
2.2.4 The Directionless Phase (1977–1980)

Despite the change in the political supremacy of non-Congress parties and the government
being composed of those non-aligned to the Congress, there were no fresh initiatives taken
in the field of labour relations, although they were brought to power by pro-labour cam-
paigns. The bottled-up grievances of the emergency period opened up floodgates of indus-
trial disputes; strikes and indiscipline were rampant. As a result of this, the government was
constrained to introduce a legislation to restrict strikes and lockouts in essential services.
The national-level apex body discussed above was discontinued. Tripartism was given a fillip
with a labour conference inviting 10 major central trade-union organizations (CTUO), some
of whom were never invited earlier for consultations on creating a comprehensive law on
industrial relations. The conference led to the introduction of an industrial relations bill in
the parliament, which was never passed. Thus, the net result was nothing concrete for either
labour or the industrial relations climate. The Janata government, however, introduced the
Industrial Policy Statement that envisaged decentralization of the industrial structure.
The Fifth Five Year Plan (1975–1980) made only a brief reference to industrial relations
focusing once again on conciliation machinery, enforcement of labour legislations, research in
labour relations, imparting training to labour officers, undertaking studies on wages and pro-
ductivity. Special attention was given to improving productivity in all spheres of the economy.
This directionless phase was, however, too short-lived to make any impact either ways.
2.2.5 The Productivity-, Efficiency-, Quality-orientation

Phase (1981–1990)
The post-1980s period, around the world, emphasized quality and productivity. The Industrial
Policy Resolution of 1980 was a reassertion of the 1956 resolution recalling the socialist prin-
ciples, employment generation and correction of regional imbalances, but with a leaning
towards productivity and efficiency. The IMF credit added to the prioritization for higher
productivity and cost efficiency.
Certain changes were made in the ID Act in 1982, under which “go slow” and “gherao”,
the typical work stoppage tactics of the Indian workforce, were declared as unfair labour
practices. The rationalization of manpower was attempted by a few private-sector indus-
tries. By and large, a lot of structural changes were witnessed. Employment in public sector
reduced, thereby reducing the trade-union strength.
The Sixth Five Year Plan (1980–1985) emphasized industrial harmony and advocated
an internal mechanism within units to promote this. The measures suggested included sug-
gestion schemes, grievance redress machinery, participative joint councils at the unit level.
Workers Participation in Management Scheme was formulated in 1983, which was made
applicable to all public-sector undertakings.
The Seventh Five Year Plan (1985–1990) emphasized efficiency, capacity utilization and
productivity, and envisaged greater competition within the industry. Interestingly, this plan,
while highlighting that there was considerable scope to improve industrial relations, admit-
ted that the existence of inter- and intra-union rivalry created industrial relations problems.
It stated that “if adequate consultative machinery and grievance procedures are evolved and
made effective, strikes and lockouts would become redundant. Effective arrangements should
be made for the settlement of inter-union disputes and to discourage unfair practices and
irresponsible conduct”.
2.2.6 The Competitive Phase

The adoption of the liberalization programme with the New Economic Policy (NEP) in 1991
brought with it a paradigm shift in the concept of industrial relations. The shift to employee
relations has been the focus of this book to prepare students for the same. There have been,
interestingly, no explicit changes in the labour policy but the worker-centric State approach
has shown a greater leaning towards pro-management positions. The NEP introduced a
M02_SING6013_01_C02.indd 34 6/18/10 11:30:17 AM

competitive phase through the process of liberalization and globalization. The focus shifted
The period of 1980s saw
to gain competitive advantage, which more often than not was not in favour of labour, with a shifting emphasis on
the rationalization of manpower, automation, restructuring, reengineering, etc. To get around productivity and qual-
retrenchment, employers have experimented with novel ways such as the VRS or a “golden ity enhancement. The
handshake” to shed surplus labour. Employer practices clearly show more aggression while Industrial Policy Resolution
promoting one-to-one employer–employee relationship. To circumvent the provisions of of 1980, while maintain-
ing the earlier socio-
labour laws, more and more organizations are re-designating the workmen as “supervisors” political-economic orien-
or “executives”. This also helps with low unionization of the workplace and thereby reduces tation, leaned towards the
chances of workplace conflicts and disputes. The worker-centric State role has seen a shift enhancement of pro-
towards being more neutral. The government–labour coalition has weakened considerably, ductivity in the industry.
given the State’s enthusiastic support for economic liberalization. The plan document also
emphasized industrial
With a view to inducting an element of dynamism in the Indian economy, a new industrial harmony for greater
policy was announced by the government in 1991. The said policy has brought about a drastic productivity.
change in the organization and working of the industrial system of the country that, in turn,
considerably influenced its labour policy. With a view to safeguarding the interest of labour,
the industrial policy has stated that the “government will fully protect the interests of labour,
enhance their welfare and equip them in all respects to deal with the inevitability of technologi-
cal change. [The] government believes that no small section of society can corner the gains of
growth, leaving workers to bear its pains. Labour will be made an equal partner in progress and
prosperity. Workers’ participation in management will be promoted. Workers cooperatives will
be encouraged to participate in packages designed to turn around sick companies. Intensive
training skill development and ungradation programmes will be launched”.
The decade 1995–2005 has seen a clearer shift to pro-management position of the gov-
“A review of industrial
ernment, reflected in lesser control of the labour ministry in policy making, lesser labour relations in the pre-reform
inspectors employed in the states and a kind of disengagement with industrial relations cli- decade (1981–1990)
mate. With employment in the public sector reducing, the role of the State and its control reveals that as against
has also declined. The Eighth, Ninth and Tenth Five Year Plans have focused on competitive 402.1 million man-days
lost during the decade
advantage, manpower planning and reduction in losses due to industrial unrest. There has
(1981–1990), that is, in
been a decline in the number of strikes and lockouts and also the number of man-days lost the pre-reform period, the
due to work stoppages. number of man-days lost
declined to 210 million
during 1991 to 2000,
2.3 Trends in Industrial Relations that is, the post-reform
period. But more man-days
Management have been lost in lockouts
than in strikes . . .”
Fundamentally, liberalization requires a laissez-faire policy, reducing the government inter- Extract from a Report
ference to the minimum. Competition is the key to market regulations in a capitalist econ- on Second National
omy. This leads to the important question of how the principles of socialism, inbuilt in our Commission on Labour
constitution, can be integrated in this scenario. Globalization has imposed a need to make
our labour laws adaptable to the new reality. Without a change in the constitution and, with
an increasingly globalized economy, as far as the labour policy is concerned, a stalemate
of sorts has arrived with the three actors unable to come to a consensus on the way ahead.
A fractured polity does not help the matter much.
2.3.1 The Inclusion of the Needs of Unorganized Labour

Today, the unorganized sector contributes 93 per cent of our workforce. An IR and labour
policy directed at only 7 per cent of the working population will be farcical. Any policy on
labour must take into account the vast unorganized sector, many of which comprise what
is called the SME sector. The second NCL suggests a separate set of labour legislation just
for the SMEs. The UPA government, in its Common Minimum Programme, is committed
to the extension of the social-security net to cover workers from the unorganized sector.
Maybe, it is time to let the organized sector regulate itself through the progressive human
resources management approach, while the government focuses its attention on the uplift-
ment of employees in the unorganized sector.
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36 Part I Context
2.3.2 Labour Laws

The second NCL has discussed in detail the competitiveness of the Chinese industry when
compared to that of India. An oft-repeated point cited in favour of China’s competitiveness
is their labour laws (read labour market and employment flexibility, to put it crudely, the
right of employer to hire and fire). This restriction in India is said to be the major impedi-
ment to a level of FDI, which is much less when compared to that of China. This may be
taking an overtly simplistic view of a complex issue and putting the blame where it may not
be due. Nevertheless, even without comparisons, inherent in the prevailing labour legislative
schemes are distortions that manifest themselves in the form of dissatisfaction expressed by
both the employers and the employees. The employees face the problem of employment secu-
rity, while the industry is faced with the problems of absenteeism, indiscipline and labour
mobility. While all parties feel that changes may be required, such changes should take into
consideration problems faced by both workmen and industries.
The existing labour laws are tilted in favour of labour due to historical reasons, and
rightly so. However, the forces in the environment are not the same as obtained 50 years back.
At least in the organized sector, despite laments from the labour, the situation has changed.
In acknowledgement of these changes, the government has become neutral (where the incli-
nation was pro-labour earlier), though it has not been able to push forth with reforms due
to lack of consensus. In the existing labour laws, the emphasis is more on rights. A result of
this is the tendency of trade unions to raise demands without due regard to financial implica-
tion in a competitive environment. To strike a balance, the Second National Commission on
Labour has made certain suggestions6:
The existing set of labour laws should be broadly grouped into four or five groups of
laws pertaining to (i) industrial relations, (ii) wages, (iii) social security, (iv) safety
and (v) welfare and working conditions, and so on.
The coverage as well as the definition of the term “worker” should be the same in
all groups of laws, subject to the stipulation that social-security benefits must be
available to all employees including administrative, managerial, supervisory and
others.
Simple, common definitions of terms that are in constant use; such terms include
“worker”, “wages” and “establishment”
The Commission has given considerable thought to the number of employees that
should be fixed as the threshold point for the organized sector. The Commission feels
that a limit of 19 workers should be accepted.
Instead of having separate laws, it may be advantageous to incorporate all the pro-
visions relating to employment relations, wages, social security, safety and working
conditions, etc., into a single law, with separate parts in respect of establishments
employing less than 20 persons.
The government may lay down a list of such highly paid jobs, which are presently
deemed as workmen category as being outside the purview of the laws relating to
workmen and included in the proposed law for the protection of non-workmen.
Another alternative is that the government may fix a cut-off limit of remuneration,
which is substantially high enough, in the present context, such as INR 25,000 per
month, beyond which employees will not be treated as ordinary “workmen”.
Keep all the supervisory personnel, irrespective of their wage/salary, outside the rank
of the worker, and keep them out of the purview of the labour laws meant for the
workers.
It is necessary to provide a minimum level of protection to managerial and other
(excluded) employees too, against unfair dismissals or removals. This has to be through
adjudication by labour court or Labour Relations Commission or arbitration.
M02_SING6013_01_C02.indd 36 6/18/10 11:30:18 AM

There should be an enactment of a special law for small-scale units. The reasonable
threshold limit will be 19 workers. Any establishment with workers above that num-
ber cannot be regarded as small.
Provisions must be made in the law for determining negotiating agents, particularly
on behalf of the workers.
Changes in the labour laws should be accompanied by a well-defined, social-security
package that will benefit all workers, regardless of whether they are in the “organized”
or the “unorganized” sector, and should also cover those in the administrative, mana-
gerial and other categories, which have been excluded from the purview of the term
“worker”.
There is no need for different definitions of the phrase “appropriate government”, and
there must be a single definition of the phrase, applicable to all labour laws.
The provisions of all these laws (related to labour management relations, e.g. ID Act,
Trade Unions Act and Industrial Employment Standing Orders Act) should be judi-
ciously consolidated into a single law called the Labour Management Relations Law
or the Law on Labour Management Relations.
New and effective legislation involving workers in the grievance-settlement machin-
ery is necessary.
A system of legal aid to the workers must be designed so that they are not handi-
capped due to their inability to afford a lawyer’s fee.
A clause naming an arbitrator or a panel of arbitrators may be added in every settle- Recommendations
ment so that any dispute arising out of interpretation of a settlement, or any other of the Second National
dispute can be referred to arbitration immediately without delay. Commission on Labour
Defining the organized
ESMA should be withdrawn.
sector
Uniformity in defini-
tions
2.4 Conclusion Fewer streamlined
labour laws
There have been substantial changes in the economic environment. Fifty years of develop- A separate law for
ment have brought about changes in both the employers and the employees. There have small-scale sector
been no systemic shifts in the management of industrial relations. The country is poised to Social-security pack-
make its presence felt amongst the comity of nations. However, multiplicity of trade unions, age for all
employers’ organizations, political parties and different parties in power at the centre and the Withdrawal of ESMA
states, a coalition government during times of change have all contributed to a state where Supervisors and highly
paid categories to be
a consensus on facing the challenges ahead is proving to be elusive. The time has come, kept out of “worker”
perhaps, to forge a consensus amongst the three actors of IR for heralding a completely new category
paradigm of industrial relations.
SUMMARY
The industrial relations system of India has its origins in the process of involving major trade unions, government
colonial past. representatives and employer representatives.
The movement for Independence, too, influenced the Industrial relations in India has been shaped largely by
evolution of the industrial relations system in India. principles and policies evolved through tripartite consultative
machinery at the industry and the national levels.
The constitution embodies certain rights to prevent any form
of discrimination or exploitation. The ILO guidelines have a great influence in promoting
uniform standards in the field of labour policy and industrial
The State role has been interventionist and labour policies
relations.
have been pro-labour, being enacted through a consultative
M02_SING6013_01_C02.indd 37 6/18/10 11:30:18 AM

38 Part I Context
The historical evolution of the industrial relations system It is argued that the labour laws are restrictive to the extent
can be categorized under six phases (i) The Protective Phase that they impose restrictions on closure of units, firing of
(1947–1956) (ii) The Consolidation Phase (1957–1965) (iii) employees and rationalization of manpower.
The Conflict-ridden Interventionist Phase (1966–1976) (iv)
A dichotomy exists, where the economic objective is global
The Directionless Phase (1977–1980) (v) The Productivity-,
competitiveness and the social objective is employment
Efficiency-, Quality-orientation Phase (1981–1990) (vi) The
security. Resolving this would require substantial
Economic Growth Competitive Phase (1991 onwards).
underwriting of a large part of social-security costs by
The current scenario points to a shift in the relative the State, which is possible only with an interventionist
bargaining power in industrial relations, away from the government providing for higher rates of public-resource
workers to the employers. mobilization and public expenditure.
KEY TERMS
industrial dispute 24 settlement machinery 24 tripartism 26
preventive machinery 23 sole bargaining agent 24
REVIEW QUESTIONS
1 The first phase of unionism represented a period of State- that had a significant impact on the industrial relations in
driven industrialization that possibly required government India.
support and control of the labour movement. Elaborate.
3 Which phase in the Indian industrial history contributed
2 The growth and transitions in the industrial relations most to the development of a congenial industrial climate?
scenario in India have been closely connected with the Give reasons for your answer.
economy and the Five Year Plans or with the political
4 The mid-1990s were characterized by a union-movement
changes. Bring out the features of the Five Year Plans
shift from those of “rights” to those of “interest”. Elucidate.

1 Why should one study industrial relations? What should be 2 The structural changes of the economy had an effect on
the focus and the expected outcomes of this study? union activity, collective bargaining practices and labour
relations in general. Elaborate.
D E B AT E
1 With globalization, the labour law provisions should be as should be no protective labour legislation in the organized
liberal in India as they are in the advanced economies. sector and it should be left to the market to regulate human
resources.
2 The industrial relations system in India caters to the elite
7 per cent of labour in the organized sector. The remain- 3 Since labour is one of the factors of production, free move-
ing 93 per cent in the unorganized sector has largely been ment of labour should encourage the efficient use of global
ignored by the State, trade unions and employers alike. There resources.
1. There were a few incidents of labour unrest during the year of industrial relations in India should be allowed to take
2005. Brief reports from a few newspapers are reproduced to address such issues on a long-term basis. Do you
here. Gather the relevant details regarding these incidents. think incidents like these would impact India’s global
On the basis of this, discuss the direction that the system competitiveness? Why?
M02_SING6013_01_C02.indd 38 6/18/10 11:30:18 AM

S Kumar’s, nationwide: The company’s worsted fabrics turned to local politicians for help. Till date, attempts to
plant at Thandavapura, near Mysore, closed on 31 May unionise employees in the BPO industry have not been
2005 as the workers resorted to an illegal strike. It was successful.
announced on 27 June that the issue was resolved and
production back on track. The financial-loss estimate is While the upheaval in Nashik has been quelled for now,
unavailable. independent local sources in Nashik said the employees stayed
away from work for two days and returned after only repeated
Omax Auto, Gurgaon: Along with group company assurances from the management. The signs are ominous for
Speedomax (both with units in Haryana), it was faced with the sunrise industry, which is estimated to clock revenues of
labour problems that lasted for a month between June and $11 billion for 2007–08.
July, but were resolved a day before the police–protesters
clash broke out in Gurgaon over the HMSI issue. It cost the A WNS spokesperson denied there was a strike at the
company close to INR 5 crore (INR 50 million) in production Nashik centre, but admitted some workers were asking for
losses. payment of additional bonus and that it was in talks with
them.
Hitachi Electric, Gurgaon: It lost two-and-a-half
days’ production in May 2005, but differences were “In October 2007, the government passed a notification
kept within company walls. The financial-loss estimate is which required the industry to retrospectively change its
unavailable. bonus payouts for employees from April 1, 2006. We have
complied with this notification and paid bonuses accordingly.
Toyota Kirloskar Motor, Bangalore: There was On account of additional payment of statutory bonus for
minor spat between the workers and the management 2006–07, the difference in bonus payouts, for that period,
over wage hike in April-May 2005. The issue was settled among certain high-performing and average performing
for the time being with a management truce in the form employees of WNS has reduced. As a result, some of our
of a 15 per cent wage hike. The shaken company is employees were asking for payment of additional bonus
considering setting up its second plant in a location that over and above statutory/performance incentive bonus for
is relatively peaceful. 2006–07. We are in discussions with these employees and
hope to resolve the issue soon,” the spokesperson told ET in
Apollo Tyres, Limbda, Gujarat: Operations at its plant an email.
were temporarily suspended on 31 May on account of an
“illegal strike” by one section of trade unions in the factory. A The Nashik unit of Maharashtra Navnirman Sena appears to
week later, the issue was resolved. The financial-loss estimate is have played a minor role in the matter.
unavailable.
NYSE-listed WNS has other problems to contend with. It saw
Tata Motors, Jamshedpur: A minor flash strike took place net profit fall 23.1% to $5.5 million in the third quarter to
on 7 June. Three hundred workers attached to the transport December 2007 due to the rise in rupee. US economic woes
section struck work for four hours against the suspension of a and high employee turnover are eroding the profitability of the
union member. Management revoked its plans to outsource sector.
general transportation from a contracting firm. No financial
loss has been reported. WNS employs about 1,800 people in two centres in Nashik,
where it mainly gets data processing work done. The
2. Read the news report7 given below. Why do you think the spokesperson said there has been no disruption in client
employees did not seek government intervention? There service. The town, about 130 km northeast of Mumbai, has
have been employee-related issues such as shift-working developed into tier-II BPO destination, where wages and
for women, employee safety, occupational diseases and property prices are much lower than in frontline cities such as
payment for over time in the “new economy” industries Mumbai and Pune.
including IT, BPO and financial services. Discuss what
the State should do to handle such issues. Should the State In fact, in recent months, a lot of public debate over wage
intervene at all? levels has taken place in Nashik, where a BPO employee
typically gets Rs 4,000 ($100) or less per month. About low
There’s trouble brewing in India’s BPO paradise. For the first wages, the WNS spokesperson said the compensation was also
time, the shadow of labour strife appears to be looming over a matter of location.
the outsourcing industry.
“The compensation for a Mumbai or Delhi-based employee
WNS Global Services, one of India’s biggest BPOs, would definitely be more than cities like Pune or Nashik,” he
experienced this first-hand at its Nashik unit when a section told ET over the phone.
of workers agitated over pay earlier this week and then
M02_SING6013_01_C02.indd 39 6/18/10 11:30:18 AM

40 Part I Context
NOTES
1 C. S. Venkatratnam, “New Paradigm in Labour Management in Globalization and Labour Management Relations (New
Relations”, in Globalization and Labour Management Delhi: Response Books, 2000), pp. 20.
Relations—Dynamics of Change (New Delhi: Response
4 India and the ILO’, Ministry of Labour, Government of India
Books, 2001), pp. 304.
(http://labour.nic.in/ilas/indiaandilo.htm)
2 P. D. Shenoy, Labour Secretary, Government of India,
5 C. S. Venkatratnam, “A Historical Analysis of Industrial
as quoted in a PIB release titled “Towards Harmonious
Relations in India”, in Globalization and Labour Management
Industrial Relations”, 17 January 2003. http://pib.nic.in/
Relations—Dynamics of Change (New Delhi: Response
feature/feyr2003/fjan2003/f170120031.html.
Books, 2001), pp. 28.
3 In India, the organized sector refers to the sector comprising
6 Report of the Second National Commission on Labour
public and private enterprises, which are registered and
(2002)
come under the purview of any, some, or several Act(s),
and maintain annual accounts and balance sheets. C. S. 7 Ritwik Donde, “Bonus Blues Stir up Labour Unrest at WNS’
Venkatratnam, “A Historical Analysis of Industrial Relations” Nashik Unit”, The Economic Times, 12 April 2008.
SUGGESTED READING
Johri, C. K. (ed.), Issues in Indian Labour Policy (New Delhi: Shriram Center for Industrial Relations, 1969).
Shriram Center for Industrial Relations,).
Sodhi, J. S. and S. P. S. Ahluwalia (eds.), Industrial Relations in
Mathur, K. and N. R. Seth Tripartism in Labour Policy: The Indian India: The Coming Decade (New Delhi: Shri Ram Center for
Experience (New Delhi: Industrial Relations, 1992).
Report of the Second National Commission on Labour (2002). Venkatratnam, C. S. (ed.), Paradigm in Labour Management
Relations (New Delhi: Response Books, 2001).
Sarkar, Santanu “Trade Unionism in Indian BPO-ITES Industry—
Insights from Literature”, Indian Journal of Industrial Relations, Venkatratnam, C. S., Industrial Relations (New Delhi: Oxford
Vol. 44, No 1, July 2008. University Press, 2006).
Sheth, N. R. “Labour Relations in New Economic Environment”,

Vikalpa, Vol. 18 (3), 1993.
APPENDIX I
Observations of the Second National Commission on Labour physical torture and threats of violence against themselves or
(2002) on Changes in the Industrial Relations dependents.
“A review of industrial relations in the pre-reform decade “We shall make a few other general observations on matters
(1981–1990) reveals that as against 402.1million man-days that have come before us about the industrial relations
lost during the decade (1981–1990), that is, in the pre-reform scenario: i) it is increasingly noticed that trade unions do not
period, the number of man-days lost declined to 210 million normally give a call for strike because they are afraid that a
during 1991 to 2000, that is, the post-reform period. But strike may lead to the closure of the unit; ii) service-sector
more man-days have been lost in lockouts than in strikes . . . workers feel they have become outsiders and are becoming
A large number of workers have lost their jobs as a result of increasingly disinterested in trade-union activities; iii) there
VRS, retrenchment and closures both in the organized and is a trend to resolve major disputes through negotiations
the unorganized sector. The exact number is not available. at a bipartite level. The nature of disputes or demands is
According to our information, no data on this subject has changing; iv) the attitude of the government, especially of the
been compiled by any State government . . . We have received central government, towards workers and employers seems
a large number of complaints on VR schemes. We have also to have undergone a change. Now, permissions for closure
been told of elements of indirect compulsion, pressure tactics, or retrenchment are more easily granted; v) the conciliation
innovative forms of mental harassment, compelling employees machinery is more eager to consider problems of employers
to resign by seeking to terminate them, and in some cases, and today consider issues like increase in productivity, cost
M02_SING6013_01_C02.indd 40 6/18/10 11:30:18 AM

reduction, financial difficulties of the employer, competition, if the financial position of the employer is very bad; vii) the
market fluctuations, and so on; vi)recovery proceedings against labour adjudication machinery is more willing to entertain the
employers who could not pay heavy dues of workers are not concerns of industry.”
being seriously pursued by the industrial relations machinery,
APPENDIX II
Main Recommendations of National Commission on Labour The Commission is of the view that statutory recognition should
on Industrial Relations Policy be granted to the union as a sole bargaining agent. In this
connection it recommends:
Collective Bargaining: While realizing the fact that the
collective bargaining agreements have not made much 1. Recognition should be made compulsory under a Central
headway in India, the NCL has recommended compulsory Law in all undertakings employing 100 or more workers
recognition of a union as a sole representative for the purpose or where the capital invested is above a stipulated size.
of bargaining. A trade union seeking recognition as a bargaining agent
from an individual employer should have a membership
The commission has suggested various measures to encourage
of at least 30 per cent of the workers in the establishment.
the growth of collective bargaining which, according to it,
The minimum membership should be 25 per cent if the
enjoys an important place in maintaining peaceful industrial
recognition is sought for an industry in a local area.
relations. It has observed that:
2. The Industrial Relations Commission is to certify the union as
1. In the absence of arrangements for statutory recognition
a representative union on the basis of either verification of
of unions, except in some states and provisions, which
membership of the contending unions or by a secret ballot
require employers and workers to bargain in “good faith”,
open to all workers in the establishment. The Commission
it is no surprise that reaching of collective bargaining
will deal with various aspects of union recognition such as: (i)
agreements has not made much headway in India.
determining the level of recognition—whether plant, industry,
Nonetheless, the record of reaching collective agreements
centre-cum-industry to determine which the majority union
has not been as unsatisfactory, as is popularly believed. Its
is; (ii) certifying the majority union as a recognized union for
extension to a wider area is certainly desirable.
collective bargaining; and (iii) generally dealing with other
2. There is a case for a shift in emphasis and increasingly related matters.
greater scope for and reliance on collective bargaining.
3. The recognized union should be statutorily given
Any sudden change replacing adjudication by a system of
certain exclusive rights and facilities, such as the right
collective bargaining has to be gradual. A move should
of sole representation; the right to enter into collective
be made towards collective bargaining in such a way
agreements on terms of employment and conditions of
that it may acquire primacy in the procedure for settling
service; the right to collect membership subscriptions
industrial disputes.
within the premises of the undertaking; the right of check-
The Commission also observed that: off, holding discussions with departmental representatives
within factory premises; inspecting, by prior agreement,
1. An essential step to facilitate collective bargaining process is
the place of work of any of its members; and nomination
the compulsory recognition of a union as sole representative
of its representatives on works/grievance committees and
for the purpose of bargaining with the management.
other bipartite committees to represent cases of dismissal
2. In order to enable employees to effectively participate in and discharge of their members before the Labour Court.
the process of collective bargaining, they should be well-
4. The unions should be made strong organizationally and
organized and trade unions must become strong and stable.
financially. Multiplicity of unions and intra-union rivalries
3. The place which strike/lockout should have in the overall should be discouraged by:
scheme of industrial relations needs to be defined.
a. Providing compulsory registration of unions
Collective bargaining cannot exist without the right of
strike or lockout. b. Raising the minimum number required for forming a
union
The Recognition of Unions: A trade union seeking
recognition as a bargaining agent from an individual employer c. Raising the minimum membership fee
should have a membership of at least 30 per cent of workers in
d. Reduction in the number of outsiders
the establishment. The minimum membership should be 25 per
cent if the recognition is sought for an industry in a local area. e. Taking steps to build internal leadership
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42 Part I Context
5. The minority unions should be allowed only the right 1. Conciliation can be more effective if it is freed from
to represent cases of dismissal and discharge of their outside influence and the conciliation machinery is
members before the Labour Court. adequately staffed. The independent character of the
machinery will alone inspire greater confidence and will
6. To represent cases of dismissal and discharge of their
evoke greater cooperation of the parties. The conciliation
members before the Labour Court.
machinery should, therefore, be a part of the proposed
7. The compulsory registration of employers’ association has Industrial Relations Commission. This transfer will
also been recommended. introduce important structural, functional and procedural
changes in the working of the machinery as it exists today.
Strikes/Lockouts and Gheraos: The NCL has categorized
industries as “essential” and “non-essential” for the purpose 2. Officers using the machinery would function effectively if
of strikes and lockouts, and observed that every strike/lockout there is proper selection adequate pre-job training and
should be preceded by a notice. period in-service training.
It has made the following recommendations: Arbitration: The Commission has observed that with the
growth of collective bargaining and the general acceptance
1. In essential industries/services, where a cessation of
of recognition of representative unions and improved
work may cause harm to the community, the economy
management attitudes, settlement of disputes through voluntary
or the security of the nation itself, the right to strike may
arbitration will be accepted.
be banned, but with the simultaneous provision of an
effective alternative like arbitration or adjudication to settle Unfair Labour Practices: The Commission recommends
disputes. that “unfair labour practices” on the part of both employers’
and workers’ unions should be detailed and suitable penalties
2. In non-essential industries, a maximum period of one
prescribed in the industrial relations law for those found
month has to be fixed for the continuance of a strike or
guilty of committing such practices. Labour Court will be the
lockout. After the lapse of this period, the dispute has
appropriate authority to deal with complaints relating to unfair
automatically to go before the IRC for arbitration. In
labour practices.”
essential industries, the right to strike/lockout should be
made redundant by requiring the IRC to adjudicate when Works Committees and Joint Management Councils:
mutual negotiations fail and parties do not agree to As per NCL, works committees should be set up in units which
arbitration. have a recognized union. The union should be given the right
to nominate the worker-members of the Works Committee.
3. Every strike/lockout should be preceded by a notice. A
strike notice to be given by a recognized union should be “A clear demarcation of the functions of the Works
preceded by a strike ballot open to all the members of the Committee and the recognized union, on the basis of mutual
union, and the strike decision must be supported by two- agreement between the employer and the recognized union,
thirds of the members present and voting. Gherao cannot will make for a better working of the Committee”.
be treated as a form of labour unrest since it involves
About joint management councils, the Commission says:
physical coercion rather than economic pressure. It is
harmful to the working class, and in the long, run may “When managements and unions are willing to extend
affect national interest. cooperation in matters they consider to be of mutual
advantage, they may set up a joint management council.
4. The penalties, which have been provided for unjustified
In the mean time, wherever the management and the
strikes/lockouts, would ultimately discharge these and
recognized trade union in a unit so desire, they can by
would, in due course, persuade the parties to sit round the
agreement enhance the powers and scope of the Works
table earnestly and settle their disputes by negotiation.
Committees to ensure a greater degree of consultation/
5. To restrain the outbreak of unnecessary strikes/lockouts, cooperation. The functions of the two in this latter situation
compensation and forfeiture of wages for a strike/lockout can as well be amalgamated.”
should be provided for.
The Settlement of Industrial Disputes: According to
Conciliation: The Second National Commission on Labour the Commission, the best way to settle industrial disputes for
observes that “the functioning of conciliation machinery has not the parties is to talk over their differences across the table
been found satisfactory due to the delays involved, the casual and settle them by negotiation and bargaining. A settlement
attitude of one or the other party to the proceedings, lack of so reached leaves no rancour behind and helps to create an
adequate background in the officer himself for understanding atmosphere of harmony and cooperation. There should be
the major issues involved, the ad hoc nature of the machinery a shift to collective bargaining. Disputes between employers
and the discretion vested in the government in the matters of and workers, the Commission observes, have been taking a
reference to disputes. It has, therefore, pointed out:
M02_SING6013_01_C02.indd 42 6/18/10 11:30:19 AM

legalistic turn, mainly because of the emphasis on adjudication 5. Payment of a subsistence allowance during the suspension
through industrial tribunals and courts. period
The Commission has laid down the procedure for the 6. Right of appeal to administrative tribunals set up for the
settlement of disputes. It observes: purpose
After negotiations have failed and before the notice of a 7. Fixing a time limit for tribunal proceedings and giving
strike/lockout is served, the parties may agree to voluntary unfettered powers to it to examine the case de novo,
arbitration. The IRC will help the parties in choosing a mutually modify or cancel a punishment ordered by the employer.
acceptable arbitrator or may provide an arbitrator from among
To make the procedure more effective, the Commission has
its members/officer if the parties agree to avail of such services.
made the following recommendations:
In essential services/industries, when collective bargaining fails
1. In the domestic enquiry, the aggrieved workers should
and parties do not agree to arbitration, either party may notify
have the right to be represented by an executive of the
the IRC of the failure of negotiations, whereupon the IRC shall
recognized union or a workman of his choice
adjudicate on the dispute.
2. A record of the domestic enquiry should be made in a
The Grievance Procedure: The Commission has observed
language understood by the aggrieved employee or his union
that “statutory backing should be provided for the formulation
of an effective grievance procedure, which should be simple, 3. The domestic enquiry should be completed within a
flexible, less cumbersome and more or less on the lines of prescribed time, which should be necessarily short
the present Model Grievance Procedure. It should be time-
4. Appeal against the employer’s order of dismissal should
bound and have a limited number of steps, say, approach to
be filed within a prescribed period
the supervisor, then to the departmental head, and thereafter
a reference to the Grievance Committee consisting of 5. The worker should be entitled to subsistence allowance
management and union representatives. The Commission has, during the period of suspension as per agreement
therefore, recommended that:
6. Supply of the record of proceedings to the aggrieved
1. Grievance procedure should be simple and have a workman
provision for at least one appeal. The procedure should
7. Payment of a subsistence allowance during the suspension
ensure that it gives a sense of (a) satisfaction to the
period
individual workers (b) reasonable exercise of authority
to the manager, and (c) participation to unions. A formal 8. Right of appeal to administrative tribunals set up for the
grievance procedure should be introduced in units purpose
employing 100 or more workers.
9. Fixing a time limit for tribunal proceedings and giving
2. A grievance procedure should normally provide three steps: unfettered powers to it to examine the case de novo,
(a) submission of a grievance by the aggrieved worker to his modify or cancel a punishment ordered by the employer
immediate superior, (b) appeal to the departmental head/
10. Having an arbitrator to give his decision in a domestic
manager, (c) appeal to a bipartite Grievance Committee
enquiry
representing the management and the recognized union.
In rare cases, where unanimity eludes the Committee, the Industrial Harmony: While industrial peace calls for both
matter may be referred to an arbitrator. a negative and positive approach, the attainments of industrial
harmony necessarily calls for a positive and constructive
The Discipline Procedure: After the views of both the
approach to the solution of industrial disputes. Therefore,
employers and the workers have been heard, the Commission
the Commission laid emphasis on the freedom of industrial
has suggested the following changes in the discipline procedure:
relations machinery from “political partisan” influence. This
1. Standardization of punishment for different types of misconduct was necessary in view of the multi-party governments that were
emerging in the country.
2. Inclusion of workers’ representatives in the domestic
enquiry committee; an adequate show-cause opportunity The Commission has referred to certain weaknesses in the
to a workman working of the existing industrial relations machinery, namely,
the delays involved, the expenditure, the largely ad hoc nature
3. Presence of a union official to represent the case of a
of the machinery and the discretion vested in the government
workman during the enquiry proceedings
in matters of reference for disputes. Therefore, to make the
4. Supply of the record of proceedings to the aggrieved industrial machinery more effective and more acceptable,
workman suitable modification in the existing machinery should be made.
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44 Part I Context
Industrial Relations Commission: The Commission has “The Commission may provide arbitrators from among its
recommended— members/officers, in case parties agree to avail of such services.
“The constitution of an Industrial Relations Commission, on “All collective agreements should be registered with the IRC.
a permanent basis, both at the state level and the centre.
“An award made, by the IRC in respect of a dispute raised
The state IRC will deal with disputes in respect of industries
by recognized union should be binding on all workers in the
for which the state government is the appropriate authority,
establishment(s) and the employer(s).”
while national IRC will deal with disputes involving questions
of national importance or those likely to affect or interest Labour Courts: The Commission recommended for—
establishments situated in more than one state. One of
1. The setting up of Labour Courts in each state. The
the principal reasons for suggesting these Commissions is
strength and location of such courts is to be decided by
the desire to eliminate the possibility of political influence
the appropriate government.
disturbing or distorting industrial peace in the country.
2. Members of the Labour Court will be appointed by the
“The Commission will have both judicial and non-judicial
government on the recommendation of the High Court.
members. The judicial member as well as the President of the
National/State IRE are to be appointed from among persons 3. Labour Courts will deal with the disputes relating to rights,
eligible for appointment as judges of High Courts. Non-judicial obligations, interpretation and implementation of awards
members need not have qualifications to hold judicial posts, and claims arising under the relevant provisions of laws
but should be otherwise eminent in the field of industry, labour or agreements, as well as with disputes relating to unfair
or management. labour practices.
The IRC will be high-powered bodies independent of the 4. Labour Courts will thus be courts where all the disputes
executive. The main functions of these IRCs will be (a) specified above will be tried and their decisions
adjudication in industrial disputes, (b) conciliation, and implemented. Proceedings instituted by parties asking
(c) certification of unions as representative unions. for the enforcement of rights falling under the aforesaid
categories will be entertained in that behalf.
“The conciliation wing will consist of a conciliation officer with
the prescribed qualifications and status. 5. Appeals over the decisions of the Labour Court in certain
clearly defined matters may be with the High Court within
“The functions relating to certification of unions will rest with a
whose jurisdiction/area the court is located.
separate wing of the National/State IRC.
APPENDIX III
Code of Discipline 7. That they will promote constructive cooperation between
their representatives at all levels and as between workers
Managements and Unions agree:
themselves and abide by the spirit of agreements mutually
1. That no unilateral action should be taken in connection entered into
with any industrial matter and that disputes should be
8. That they will establish upon mutually agreed basis, a
settled at an appropriate level
grievance procedure, which will ensure a speedy and full
2. That the existing machinery for settlement of disputes investigation leading to settlement
should be utilized with the utmost expedition
9. That they will abide by various stages in the grievance
3. That there should be no strike or lockout without notice procedure and take no arbitrary action, which would
bypass this procedure
4. That affirming their faith in democratic principles, they bind
themselves to settle all future differences, disputes, grievances 10. That they will educate the management personnel and
by mutual negotiation, conciliation and voluntary arbitration workers regarding their obligations to each other
5. That neither party will have recourse to (a) coercion (b)
Managements agree:
intimidation (c) victimization or (d) go-slow
1. Not to increase workloads unless agreed upon or settled
6. that they will promote constructive cooperation between
otherwise
their representatives at all levels and as between workers
themselves that they will establish upon mutually agreed 2. Not to support or encourage any unfair labour practice
basis, a grievance procedure, which will ensure a speedy such as (a) interference with the right of employees to
and full investigation leading to settlement enrol or continue as union members (b) discrimination,
M02_SING6013_01_C02.indd 44 6/18/10 11:30:19 AM

restraint, or coercion against any employees because of Unions agree:

recognized activity of trade unions and (c) victimization of
1. Not to engage in any form of physical duress
any employee and abuse of authority in any form
2. Not to permit demonstrations, which are not peaceful and
3. To take prompt action for (a) settlement of grievances and
not to permit rowdyism in demonstrations
(b) implementation of settlements, awards, decisions and
orders 3. That their members will not engage or cause other
employees to engage in any union activity during working
4. To display in conspicuous places in the undertaking the
hours, unless as provided for by law, agreement or
provisions of this code in the local language(s)
practice
5. To distinguish between actions justifying immediate
4. To discourage unfair labour practices such as (a)
discharge and those where discharge must be preceded
negligence of duty (b) careless operation (c) damage to
by a warning, reprimand, suspension or some other
property (d) interference with or disturbance to normal
form of disciplinary action, and to arrange that all such
work and (e) insubordination
disciplinary action should be subject of an appeal through
normal grievance procedure 5. To take prompt action to implement awards, agreements,
settlements and decisions
6. To take appropriate disciplinary action against its officers
and members in cases where enquiries reveal that they 6. to display in conspicuous places in the union offices, the
were responsible for precipitate action by workers leading provisions of this code in the local languages, and
to indiscipline
7. to express disapproval and to take appropriate action
7. To recognize the union in accordance with the criteria against office bearers and members for indulging in
(Annexure I) evolved at the 16th Session of the Indian action against the spirit of this code
Labour Conference in May 1958.
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chapter three
3.1 Industrial Relations: A Historical Perspective After reading this chapter, you should be able to:
3.2 Industrial Relations in the UK • Understand the complexities in comparing
3.3 Industrial Relations in the European Union the IR systems across countries
3.4 Industrial Relations in the USA • Design a framework for a meaningful
3.5 Industrial Relations in Australia comparison of IR systems in major
3.6 Industrial Relations in China economies of the world
3.7 Industrial Relations in Japan • Identify the international trends in industrial
3.8 Industrial Relations in South Korea relations
3.9 Industrial Relations in Singapore
3.10 International Trends
National Steel Limited
National Steel Limited is the flagship company of the National Group—an industrial conglomerate with diverse inter-
ests. With around 20,000 employees, it is seen as one of the best employers in the country. It enjoys an unblemished
record in having a distinctive culture and maintaining industrial peace. National Steel, with a plant in Jharkhand that
has the capacity to produce 5 million tonnes of steel per annum, is the lowest-cost steel producer in the world, up
to the crude steel stage. It has around 20 per cent of the domestic market share in products such as coils, bars, mer-
chant products and structurals. It has recently started supplying sheets to the automobile sector but weak R&D has
prevented it from accessing the high-end international market. Currently ranked as the 52nd largest steel producer
in the world, National is looking to sufficiently grow through acquisitions so as to feature in the global top ten. To
do so successfully, it will have to add an additional capacity of around 20 million tonnes. National wants to add this
excess capacity within India (closer to the raw-material source) for crude-steel production, and procure finishing
mills closer to the global high-end markets (Europe and North America).
National has located a reputed steel group in Europe with a sizeable presence in the North American and European
markets. Though National, conscious of its corporate image and its contribution to the brand value, does not intend
to tarnish its image, yet, it wants to leverage this advantage in global acquisitions. However, to maintain cost advan-
tage and maximize the synergy of the two companies, issues such as manpower rationalization, rotation, and system-
atic people development have to be considered before making a decision. The whole range of regulatory bodies, trade
unions, wage policy, etc. may be quite different in the EU than in India.
Raman Seth is the head of corporate HR of the National Group and also a part of the core group that has been con-
stituted to make an in-depth study on the proposed acquisition. Raman must plan well in advance and give his inputs
well before the bidding process starts. Till now, he had no reasons to learn about employee- and employment-related
issues outside India.
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Industrial Relations in Major
Industrialized Economies: A
Comparative Study
The formulation of labour-management relations policy is one of the significant tasks at the national level, and its suc-
cessful formulation and implementation can influence the labour-relations climate at the industry and enterprise levels.
Such policy formulation is generally done at the national level and is, thus, influenced by the socio-economic and politi-
cal climate of the country and also practices adopted by neighbouring countries. However, the effectiveness of the indus-
trial relations system is dependent largely on the respective strengths of the employers’ and the workers’ organizations.
As India Inc. globalizes, issues that face Raman Seth become common. Indian managers are
expected to be nimble on their feet as they modernize, acquire and expand. The world is fast
becoming their playground. HR-related issues are one of the defining factors that determine the
success or the failure of mergers and acquisitions. The cultural assimilation of two diverse popula-
tions to derive synergies require sensitive appreciation of how the different industrial systems have
evolved, what the driving forces are and where they are heading. It would be useful to take a look at
one aspect of the industrial systems, that is, industrial relations system, and how they have shaped
up in a few representative economies of the world.
The need to understand and appreciate differences in perspective and approach to industrial rela-
tions in different countries emerges from the internationalization of business. It is a difficult task to
compare industrial relations systems, structure and processes across countries since there is no frame-
work for such comparison. Unlike other functional areas such as production, marketing or accounting
standards, the area of industrial relations is woven into the socio-political, cultural and economic fabric
of a nation. From a purely practical point of view, setting up a unit in another country may require a
relationship and a structure completely different from what obtains in the home country, unlike opera-
tions or production systems. There are appreciable differences in concepts and context across nations.
The labour legislations may be completely different and so may be the structure of trade unions.
A framework for such comparison, therefore, may be necessary. For the purpose of this chapter,
we may take a look at a few industrialized economies and examine the industrial relations with par-
ticular reference to: evolution, trade unions, collective bargaining and legislations.
3.1 Industrial Relations: A Historical Perspective

At its inception, the management of industrial relations emphasized the economic perspective, labour
being a factor of production and the employment terms predominated by demand-and-supply eco-
nomics. The classical-economics view predominated the labour–management relationship, advocat-
ing free and unregulated labour markets. As discussed in Chapter 1, the laissez-faire approach led
to an exploitative regime as far as capital’s treatment of labour was concerned. Industrial relations,
therefore, initially took on a regulatory role to correct this unequal bargaining power. Subsequently,
industrial relations broadened its scope taking on a protectionist role, addressing the problems that
came to the fore during the laissez-faire phase. The laissez- faire essentially resulted in complete one-
sidedness of a power relationship between the employers and the employees, almost always loaded
M03_SING6013_01_C03.indd 47 6/17/10 1:54:26 AM

48 Part I Context
against the employee because of market imperfections. With external factors and market
imperfections coming into focus, State intervention had to be initiated to address these issues.
Legislations to protect the rights of the employees and an institutional mechanism to handle
conflicts were the products of this phase. The employees organized themselves into trade
unions and fought for legitimization of the same, thus restoring some balance in the power
equation between the employers and the employees. The right to associate was an important
one and was duly recognized as such, thus providing a major force in shaping the trend of
industrial relations. With this emerged the bargaining role of the industrial relations system
and the demarcation of the role of the State, the employers and the employee organizations/
trade unions.
State intervention brought the focus of industrial relations outside the industrial enter-
prise through bargaining at a pan-industry level and sometimes even on the national level. To
a large extent, labour ceased to be a factor of production that could give competitive advan-
tage on account of cost differential. Conflicts moved out of the workplace and, hence, State
intervention was welcomed by the employers. Unions got the advantage of an influential
base outside the workplace. This, however, led to the politicization of industrial relations in
general and trade unions in particular.
The State intervention and the labour-related regulations, however, failed to address
labour-related problems such as low productivity, absenteeism, attrition, employment secu-
rity, working conditions in terms of safety and occupational health. The above concerns led
to the emergence of the human-resource-management perspective in the 1980s; that it is not
factors external to the enterprise, but ineffective human-resources strategies, policies and
practices that create labour problems. With the pressure on enterprises to adapt and change,
employers started concentrating on issues at the enterprise level.
3.1.1 The International Factors

A major thrust for all parties to IR is to establish a robust system of IR so as to ensure eco-
nomic and social imperatives. To do so, a few contemporary issues have to be taken into
account by the actors of an IR system so as to factor these in, while trying to arrive at that
robust system.
The globalization of business and the resultant competition, changes in technologies,
Sound labour relations scales of operation and the widening of markets are forcing all enterprises to cut flab
are built up from within
an organization. The envi-
and become nimble. All factors of production have ceased to be the source of perma-
ronment external to the nent competitive advantage. It is the competence of the employees, and their motiva-
enterprise is and should tion and involvement on which the enterprise has to rely for a sustainable competitive
be facilitative, or “protec- advantage.
tive” in terms of prescrib-
ing basic standards and Information technology has had and is having a huge impact on organization struc-
norms relating to areas tures, work processes, working conditions, geographical spread, the nature of super-
like social security, safety vision, communications, performance measurement, compensation strategies and
and health, freedom of
association, weekly and
the management of people. The demographic profile of workers has also changed
other holidays and rest with greater women and older worker’s participation.
periods, etc.
The restructuring of industrial enterprises and business organizations is taking place
across a majority of countries as they adapt to the forces unleashed by globalization.
In many cases, this has resulted in situations that have a big impact on industrial rela-
tions and socio-political fronts. Privatization and divestment of State-owned com-
panies have resulted in redundancies that cause a strained relationship amongst the
actors of IR.
Another feature is the changes occurring in the workforces, to varying degrees, in
both industrialized market economies and developing economies. The new worker/
employee, by and large, is better educated and is different in outlook when compared
to his blue-collared predecessor. And this proportion is rising, which means a complete
change in the approach to managing this lot. Knowledge economies and an increasing
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Industrial Relations in Major Industrialized Economies: A Comparative Study 49
service sector (comprising almost 55 per cent in India) will see a complete shift in
employee profile. Perhaps, the skill and knowledge of an employee may be one area
where the interests of all actors merge leading to an increasing shift towards participa-
tive management and employee involvement, both in development and production.
With the emphasis on cost efficiency and product quality, more and more of non-
core activities may get outsourced to those who specialize in some non-core aspect of
work. There may be different sub-groups of employees to be managed. The era of “one
consolidated workforce” may be a thing of the past.
The main factors driving
The role of unions is changing. The unions seem to be in disarray, trying to define changes in industrial rela-
a role in the changing environment. Unionization is on a decline and they have not tions are:
yet adapted themselves to the new realities of fundamental shifts in the work and Increasingly com-
business environment. In the interim, there is a growing realization that, perhaps, petitive environments
the employees, too, need to lend a hand in competency development for sustained caused by the integra-
tion of world markets
advantage and survival. However, there are many issues on which they may have for-
The direction of the
mulated a position but not the wherewithal to forge ahead; for example, collectively change towards
challenging the issues facing the knowledge and service workers, outsourcing, etc. decentralization of
And, maybe, there is a growing a realization that their contribution may be more bargaining
effective in managing workplace relations. A movement towards
increased flexibility in
Judging from the attention paid by researchers, it would seem that the 1980s and the 1990s wages, labour deploy-
were periods of change, turmoil, and even transformation in industrial relations systems all ment, and workplace
over the world. Researchers, by and large, agree that factors driving these changes are: practices
Increasingly competitive environments caused by the integration of world markets

The direction of the change: decentralization of bargaining, and a movement towards
The changing perspective
increased flexibility in wages and labour deployment at the workplace level
of IR may be attributed to:
Relatively less attention has been paid to how industrial relations systems have changed in The international-
the developing nations of Asia. Given that countries have seen considerable changes in their ization of business,
industrial relations systems, we need to understand the nature of these changes. intense competition
and rapid changes in
technology, products
3.1.2 The Political Factors and markets
Information technol-
Labour Relations, by most governments, were viewed as a means to prevent workplace con- ogy, and its impact on
flicts or to contain such conflicts so that the production doesn’t suffer and consequences the structure of orga-
of conflict don’t spill over to the other domains of political-social-economic realms. In the nizations, the nature of
South and Southeast Asian countries, this was largely achieved through the creation of work and the way it is
organized
dispute-settlement and conflict-resolution machineries established by the government, that
The changing work-
is, outside the purview of the workplace alone. In a few industrialized economies of the West,
force profile
the employer–employee relationships were largely controlled through enactments and legis-
The tendency towards
lations. The objective of the State in industrial relations in Asian countries was keep a control outsourcing
on the freedom of the employer for such actions that may affect employment, especially ter- The changing role of
mination, closures, dismissals. At the same time, they also resorted to restrict trade-union unions
action and control unions, to keep proliferation of unions in control. The Asian countries
emphasized efficiency; and the protection of employment was subservient to this overall
objective. The cultural factors represented by a strong hierarchical structure, paternalistic
management systems, respect for authority were hindrances to a negotiation and communi-
cation, based on equality, between the employers and the employees. Japan, however, main-
tained a different culture of workplace flexibility, strong enterprise identity and enterprise
unions. Australia and New Zealand, on the other hand, had centralized IR models, but things
are changing now even there.
The industrial relations systems in a few countries are discussed in the next sections.
The historical evolution of industrial relations system primarily originated from Britain and,
hence, has been elaborated in detail. The framework for comparison mainly comprises trade
unionism, the role of employer organizations and the legislative framework.
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50 Part I Context
3.2 Industrial Relations in the UK

Britain was the first country to industrialize and also the first country to set up industrial
relations institutions. The history of IR in Britain has been eventful, and it is necessary to
discuss this evolution, especially in the twentieth century, in some detail.
3.2.1 The Evolution

Britain is regarded as the place where modern industrial relations came into existence and
matured. Any serious study of industrial relations will remain incomplete (and may not
even make sense), unless one has some appreciation of the developments during the years of
industrialization and the years following it in Great Britain.
P RIO R TO 1990. During the early part of the twentieth century, the IR was largely
shaped around the challenges of the staple industry, with the twin concerns of containing
industrial conflict because of wages and also with a view to regulating the industry because
of intense competition. This resulted in an industry-level collective bargaining to take care
of the twin problems. The next major change was ushered in the time after the World War,
when the concern was an increased productivity in a war-ravaged economy as well as new
capital-intensive technology. The lack of firm-level bargaining was acutely felt, and increas-
ingly, it was pointed out that due to this lack, there was little scope for firms to take measures
for improvement in productivity and introduce changes or/and reorganize changes in work.
This concern was articulated by the Donovan Commission that submitted its report in 1968
mainly saying that the trade unions and the employers’ organizations were so focused on
industry-level bargaining that not enough resource and attention was being paid at the firm
level, where most of the changes were to take place. There was little control over the union-
ized employees and also an absence of institutions for regulating, at the firm level. The legisla-
tive measures based on the recommendations could not be pushed through due to large-scale
pprotests. It was only in 1974 when, gradually, reforms to introduce discussions at the firm
There is a balance of llevel were introduced. The main provisions were:
social power in the
workplace, a largely i) A statutory right to trade-union recognition
unitarist view of industrial
relations, and, most fun- ii) Workers were granted a set of individual rights designed to encourage and improve
damentally, an emphasis collective bargaining, including funding for shop-steward training, time off for shop
upon individual rather stewards, and rights to information and consultation
than collective regulation
of social relations. iii) A new form of extension procedure was created, which permitted trade unions
to use legislation to drive the employers to the bargaining table and grant them
recognition
Post-1979
This resulted in facilitating decentralized bargaining and a proliferation of bargaining into
iindustries and firms hitherto unexplored. However, instead of promoting peace, the reforms
With the collapse of the pplunged Britain into an era of widespread industrial conflict, threatening to affect competi-
institutions of collective
regulation, there was a
ttiveness of the UK and also affecting its economic power. The unions, at most places, brought
shift in the balance of tthe management to its knees.
class power in Britain, The era of “Thatcherism” (which largely implied actions based on Margaret Thatcher’s
with the shrinking of ppolitical and economic philosophy of reduced State intervention, free markets, and entrepre-
trade unionism. The nneurialism) and the Employment Relations Act (1979) were reactions to the era of industrial
autonomous strength of
British trade unionism was
cchaos and strong-arm tactics of the trade unions. The above Act made revisions in the trade-
overcome by a combina- uunion recognition and modified/removed a number of other rights. The thrust of the govern-
tion of the scale and the mment was to restore a balance in the relationship through taming the unions. Recession in
scope of State activism tthe early 1990s further weakened the trade unions, thus paving the way for a fundamental
and legislations and also rrestructuring of the industrial relations. There has been a sharp decline in trade unionism
the willingness of govern-
ments to endure industrial
ssince then. A new individualized kind of relationship has emerged where a large propor-
conflict. ttion of workers are not members of any trade union and are not covered under collective
bbargaining.
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RECENT CHANG ES. There have been a few changes to protect the rights of the
Thatcherism
workers, including regulations on minimum wages, working hours, more protection against
unfair termination, rights for working women, etc., but the emphasis remains towards weak- Margaret Thatcher’s
political and economic
ening collectivism in the management of industrial relations. The regulation of the labour philosophy of reduced
market has taken the form of individual legal rights, enforceable through labour courts and State intervention, free
State agencies, not collective rights designed to strengthen trade unions, which could then markets, and entrepre-
take on the role of regulating social relations through collective bargaining. neurialism
3.2.2 Trade Unions in the UK

Three characteristics distinguish the British industrial relations system. First and foremost The three distinctive char-
is the tradition of voluntarism. The second feature is the representation of workers through acteristics of trade unions
in Britain:
trade-union officers at workplaces in the form of shop stewards. Shop stewards are members
who occupy an official position in the union hierarchy and who are also employees of an The tradition of volun-
organization. Third, the organization of trade union-membership is on occupational rather tarism
than industrial lines. So, there is a “formal system”, originating from institutions created The representation
of workers through
through the agency of the State and the other is the informal system created by actual behav- trade-union officers at
iour of trade unions and employers’ associations, managers, shop stewards and workers. The workplaces in the form
formal and informal systems are generally in conflict, as the informal system undermines of shop stewards
the regulative effect of industry-wide agreements. The formal system, however, still exerts a The organization of
powerful influence in the industrial climate of the UK. trade-union member-
The trade unions function with a focus on primarily three sets of objectives: ship being on occu-
pational rather than
i) Maintaining and improving wages, hours and conditions of work, and also what industrial lines
wages can buy, increasing the size of real and net income and the share accruable to
the working class
ii) Providing and improving opportunities for the advancement of the workers for full Shop Stewards
employment
Shop stewards are
members who occupy
an official position in the
union hierarchy and who
BOX 3.1 FOR CLASS DISCUSSION are also employees of an
organization.
The “It’s About Time” Campaign aims to put long hours and work–life balance at the top
of the workplace agenda. It builds on the growing evidence of long hours, greater pres-
sure at work, and the need to introduce more flexibility to UK workplaces.
The EU Working Time Directive sets a 48-hour average limit to the working week.
The UK introduced the directive in 1998, but secured an opt-out for certain workers and
industries. The European Parliament wants the UK to be compelled by the European
Commission to “come into line” with the rest of Europe.
In 2002, the Department for Trade and Industry (DTI) found that twice as many UK
employees would rather work shorter hours than win the lottery. The 2003 Labour Force
Survey (LFS) found that 4,000,000 people work more than 48 hours a week on an average.
That is 700,000 more than in 1992, when there was no long-hour’s protection. A TUC
(Trade Union Congress, an umbrella organization comprising a federation of trade unions
in the UK) poll in 2003 found that only one in three people at work know that there is a
48-hour average working-week limit. The 2003 TUC survey found that one in three of those
who have signed an opt-out say they were given no choice. Nearly two out of three people
who say they work regularly for more than 48 hours a week say they have not been asked
to opt out of the working-time regulations. The TUC believes that either the law is being
ignored, or the loopholes and exceptions are so great that few workers enjoy protection.
In what way do you think the unions have changed their approach? What could be
the factors responsible for this change in approach?
Source: http://www.bized.co.uk/compfact/tuc/tuc19.htm
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52 Part I Context
iii) Extending the influence of the working class over the industry and arranging for
their participation in management
The trade unions of Britain, not only defend or improve the wages and conditions of labour,
but also raise the status of the workers in the industry and society. They extend the area of
social control of the nation’s economic life. Trade unions in England have provided benefits
for themselves and have also worked for the development of social services in the State. They
recognize the needs of individuals and are, to a large extent, taking responsibility for the
whole community. Read and discuss the issue raised in Box 3.1.
3.3 Industrial Relations in the European

Union
For the purpose of industrial relations, the European Union cannot be considered as an inte-
grated whole as of today and the traditional framework for studying IR may not be appli-
cable. Nevertheless, as the efforts to integrate are on, at this point of time, we may take a
look at the important institutions, laws and trade unions as obtains in member countries.
The European Commission has been attempting a pooling of research on the IR structures,
processes, laws and practices in member countries with a view to bring in gradual uniformity
on larger policy matters pertaining to industrial relations, but it is early days yet.
3.3.1 The Trends in the EU

In this section, we identify a few trends across the member States1
Trade Unions:
Unions in most of the member countries are organized on a sectoral or occupational
basis.
Blue-collar unions are losing influence and the white-collar unions gaining
significance.
In most countries, there is more than one peak organization or confederation, with
divisions on occupational, religious or political lines.
Large differences in trade-union density—the ratio of actual to potential member-
ship—continue to exist between the member States, ranging from 80 per cent in
Denmark to 8 per cent in France.
The density rate is high in the Nordic countries, while Spain, France and most of the
new Central and Eastern European member States have comparatively low rates.
The overall weighted-average-density rate in the EU is now between 25 per cent and 30 per
cent of wage earners, and the trend in union density is clearly downward across Europe.
Most of the EU member states experienced a fall in density over the period from 1995 to
2004, with unions in Central and Eastern Europe facing dramatic membership losses.
Collective Bargaining:
Collective bargaining, almost across all the member States, has moved towards decen-
tralization, although wide variations exist in practice.
For example, in Spain, works councils operate with a clear mandate and sign 74 per
cent of plant agreements.
In Austria, commentators observe “organized decentralization”, a phenomenon linked
to “delegation” or “opening” clauses, enabling some flexibility on certain economic
and working conditions.
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Workplace Representation:
Workplace representation has been legally established and formally installed in most
of the EU countries and is a distinctive feature of the EU industrial relations system.
There is, however, a great range of forms of representation, reflecting the specific
characteristics of industrial relations in particular countries.
The most significant European legislation on workplace representation is the frame-
work directive of the minimum standards for informing and consulting employees at
the company level in all the member States (Directive 2002/14). However, the direc-
tive is drafted in very broad terms, leaving considerable scope for individual States to
implement its terms. Thus, it creates a general framework for informing and consult-
ing employees, without harmonizing representation.
There is a distinct move-
Despite the variations, there appears to be a conscious effort to build a pan-European frame- ment towards trade-union
work on industrial relations. Regular exchanges of reports and research at the commission organization at the
level have been taking place over the past few years and have resulted in a few directives for pan-EU level. Though
the constituents. Therefore, despite this diversity in country-specific practices in TUs, collec- some diversity prevails
at national levels, efforts
tive bargaining and employee representation, there is a progressive unity and coherence at
are on at some sort of
the European level. The European Trade Union Confederation (ETUC) brings together vir- integration. The ETUC is
tually all major confederations and centres in the current member States (with a number of a step in that direction.
gaps in coverage filled in recent years). Also affiliated to ETUC are major European-industry
federations, grouping almost all major EU trade unions in their respective sectors, along with
many from the new member States.
Craft Unions
Craft union refers to
3.4 Industrial Relations in the USA organizing a union in a
manner that seeks to unify
workers along the lines
3.4.1 Trade Unions in the USA of the particular craft or
Industrial relations in the USA parallels the development of trade unions, organized labour trade that they work in.
and labour legislations, as it does elsewhere. The first major landmark in the history of mod-
ern US industrial relations was the founding of the American Federation of Labour (AFL)
by Samuel Gompers in the year 1886. The AFL, at its time during the late nineteenth and the
AFL-CIO
early twentieth century, was the largest federation of unions in the USA. It was organized on
the basis of “craft unions” and was conservative in approach in as much as it did not chal- The American Federation
of Labour and Congress of
lenge “capitalism” but was more concerned with the bread and butter issues of workers, such
Industrial Organizations,
as improvements in the working conditions. Being basically an association of crafts-based commonly known as the
unions, AFL failed to prevent dissension in ranks when it could not organize itself into indus- AFL-CIO, is a national
trial unions, when important sectors like auto, steel, etc. started growing. The Congress of trade-union centre. It is the
Industrial Organizations (CIO) was another federation formed in 1935 and took the industrial- largest federation of unions
in the United States. It was
union approach, mostly comprising dissenters from the AFL. Both unions saw growth during
formed in 1955 with the
the years when the economy was slack and competed with each other, sometimes violently. merger of two large federa-
The CIO, in 1955, merged with the AFL to form AFL-CIO. tions named AFL and CIO.
Today, approximately 60 unions in the USA and Canada are affiliated with the AFL-CIO
The AFL was the first
(American Federation of Labour-Congress of Industrial Organizations) and it represents Federation of Trade
close to 10 million employees. The AFL-CIO has little direct control over the affairs of its Unions in the USA.
members. Rather, it works as an umbrella organization for trade unions at the policy level. The AFL promoted the
craft-union strategy
and generally saw its
role within a capitalist
3.4.2 Labour Legislations in the USA philosophy.
The first major piece of legislation pertaining to labour relations was the Norris La Guardia The CIO was formed
Act, 1932. Prior to this Act, employers were not required to enter the collective bargaining later, in the 1930s,
process, had free hand in hiring and firing, and enforcing unfair employment contracts. One and followed an
industrial-union
such unfair condition was forcing an undertaking from employees of not joining a union pattern.
as a precondition to employment. These employment contracts were known as “yellow dog
M03_SING6013_01_C03.indd 53 6/17/10 1:54:30 AM

54 Part I Context
c
contracts”. The Norris La Guardia Act (1932) made these contracts illegal, thus allowing
The major pieces of eemployees to form and join unions. This was followed by the National Labour Relations Act
labour legislation govern-
ing the relationship issues ((1935), also known as the Wagner Act, which provided for the employees:
were: 1. Protection of their rights to organize
The Norris La Guardia
Act, 1932 2. The right to engage in collective bargaining and
The Wagner Act, 1935 3. The right to strike in furtherance of their demands
The Taft Hartley Act,
1947 4. Striking of certain unfair labour practices by employers as illegal
The Landrum Griffin 5. Secret ballot elections for representative unions
Act, 1959
6. The creation of National Relations Board for enforcing certain provisions of the Act
These two Acts gave fillip to the unions, and their activities increased both under the AFL
and the CIO. The balance of power shifted towards the unions and this period (till 1947)
witnessed an increase in strikes and pressure tactics by the unions.
The Taft Hartley Act of 1947, also known as the Labour-Management Relations Act, put
curbs on the activities of the unions in order to restore a balance in the relationship between
the management and the workers. The significant provisions included:
The addition of a list comprising “unfair labour practices” on the part of the employ-
ees’ union
The prohibition of certain kinds of strikes and industrial action on the part of the
union, e.g., wildcat strikes
The prohibition of “closed shop” and severe restriction on “union shops”
The injunction on strikes affecting national health or safety
The Landrum Griffin Act of 1959 aimed at protecting the union members from possible
wrong-doing and also empowering the members to terminate the right of the union to rep-
resent through decertification elections.
While the Wagner Act and the Taft Hartley Act concern the workers and the unions in
the private sector, the provisions on the same have been extended to the government employ-
ees through the Executive Orders and also the Civil Services Reform Act.
3.5 Industrial Relations in Australia

Just as in India, both the federal and the state governments can legislate on labour matters.
Though the federal law, in order of precedence, is at a higher level, even the state laws and sys-
tems have a significant influence on most matters relating to industrial relations. The federal
system is largely based on conciliation and arbitration. An important institution that plays
a role in IR in Australia is the Industrial Tribunal as a compulsory third-party arbitration in
matters involving disputes and conditions of employment.
3.5.1 The Evolution

The oldest piece of legislation in Australia is the Conciliation and Arbitration Act, 1904.
This Act has seen many amendments over the years. The principal aim of arbitration was to
prevent any form of industrial action. The matters of dispute could be referred to a court for
settlement or award through arbitration, which would be binding. The Act also encouraged
the employers to recognize a representative union. By and large, the State has intervened
consistently and vigorously in matters pertaining to IR in Australia. The Conciliation and
Arbitration Act, 1904, was replaced by the Industrial Relations Act, 1988. The IR Act, 1988,
required the federal trade unions to register themselves with a registrar to be able to take
assistance of the arbitration process and other legal rights flowing from the Act.
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3.5.2 The Recent Changes

There has been a change in the IR framework in Australia with a distinct movement towards
decentralization and encouragement for the employers and the employees to settle at the
enterprise level without third-party intervention. The most significant instrument of the
workplace-relationship-reform process was the Workplace Relations Act 1996 (WR Act)
with the objective to the settlement of conflicts and disputes at the workplace itself. The gov-
ernment itself intervenes only in settling issues like minimum wages and working conditions,
but other matters pertaining to wages and working conditions are left to the parties to settle
between themselves. Another feature is the freedom to negotiate collectively or to arrive at
the Australian Workplace Agreement (AWA) that permits agreement between the employer
and a single employee through a bargaining agent of choice. The freedom of association
(including a choice not to associate) has also been provided in the Act.
3.5.3 Trade Unions in Australia

There is only one major trade union federation in Australia, The Australasian Council of
Trade Unions (ACTU). Formed in 1927, it was an attempt to consolidate the unions into one
big body. However, the objective of ACTU has not been fully met since, instead of becoming
one coherent whole, it remains a lose collection of trade-union organizations. It represents a
majority of trade unions, but not all. The ACTU was primarily a union of blue-collar employ-
ees, and subsequently, the white-collar and government employees have mainly been covered
under bodies that emerged later. The ACTU has a close relationship with the Labour Party.
The trend now is towards amalgamation into larger unions. The number of unions
with smaller numbers (1,000 and below) has decreased, whereas, those with larger numbers
(50,000 or more) have increased their percentage of total union membership.
The Australian government is bringing about reforms in the area of workplace relations
continuously since 1996. The extract below is the latest in a series of such proposed
reforms. Discuss the reasons that you think are behind these changes and how it would
impact business and the employees. You may also discuss the similarities and differences
with the provisions that obtain in India.
A New Workplace Relations System
The Australian government began to develop a new workplace relations system with the
introduction of its transitional reform measures in March 2008. These measures initi-
ated the award modernization process and removed the power to make new Australian
Workplace Agreements (AWAs).
The government was drafting a new legislation, which was expected to be introduced
into the parliament in late 2008, enabling the commencement of a simpler, fairer and
more flexible workplace relations system by the start of 2010.
The key elements of the government’s new workplace relations system were:
Collective enterprise bargaining, with no provision for statutory individual agreements
A safety net of legislated minimum employment standards and modern awards
The right to freedom of association and genuine workplace representation
Grievance-and-dispute-settlement procedures and freedom from discrimination
A new independent umpire—Fair Work Australia
Balanced laws that provide protection from unfair dismissal in a way which
addresses the particular circumstances and concerns of small businesses
A uniform national workplace relations system for the private sector
Source: Australian Government: Department of Foreign Affairs and Trade; http://www.

dfat.gov.au/facts/workplace_relations.html.
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56 Part I Context
3.6 Industrial Relations in China

3.6.1 The Historical Perspective
China’s industrial relations system is deeply entrenched with its economic and political organiza-
tion. The All-China Federation of Trade Unions was set up as early as 1925; its incorporation
into the Chinese communist party defined the labour movement’s role within a State-dominated,
import-substitution industrialization policy in a centrally planned closed economy2. The main
characteristics of the system included State ownership of industrial enterprises, the implicit guar-
antee of employment for workers, centralized wage structure, a rigid labour market with little
inter-enterprise or inter-regional mobility, and the absence of price- or efficiency-driven controls
over the industry. Thus, employment was permanent, and the enterprise was responsible for the
provision of housing, and for all welfare, medical, and retirement benefits, as well as for social
and entertainment needs. Thus, the enterprise shouldered the responsibility for national social
security. A sense of identity for the industrial worker was based on cradle-to-grave welfare ben-
efits. The term “iron rice bowl” is used to describe this inclusive IR system. Within this system,
industrial relations consisted of a dualistic structure of co-determination.
P RIOR TO 1990. The combination of administrative labour allocation and the “iron
rice bowl” produced a rigid and inflexible system within the enterprise, and outside as well.
The absence of numerical flexibility was further reinforced by the absence of labour mobility,
given the household registration system (which only permitted workers to be permanently
employed in their area of residence). The objectives of industrial relations policy were to sup-
port the economic and social structure that communism built, through mobilization of the
mass of workers behind economic policies. However, it needs to be noted that trade unions
rights and roles were banned during the Cultural Revolution (restored under the modern-
ization period of Deng. By and large, however, the need for flexibility in the IR system was
absent, given the absence of competitive pressures in the system.
T HE R E CE NT CH ANG E S. The Chinese industrial relations system has been in

considerable ferment since the opening up of the Chinese economy post-1978, and, in par-
ticular, post-1983. Decentralization in the State sector implied changes in industrial relations
and human-resource practices, with new practices that are increasingly focused on getting a
higher degree of numerical and functional flexibility. The contract system emerged to replace
the lifetime employment system. The joint ventures brought with them flexible IR and HR
practices from abroad. Further, as part of these reforms, the Chinese government enacted
a new labour law in 1994 that essentially sought to create a new industrial relations sys-
The industrial relations tem
t within the socialist market economy, but the implementation of this law has not been
system in China is strug- uniform.
u In terms of industrial relations legislation, the government’s focus in the foreign-
gling to adapt to the investment
i sector is to keep basic labour protection and welfare laws as similar as possible to
fundamental economic
changes post-1978. From the
t State-owned sector.
a rigid system in the pre-
1978 era to the gradual
adjustment to global 3.6.2 Trade Unions in China
3
practices has left the sys-
tem in a state of flux. The trade union constitution’s preamble states the role of the union rather clearly: “The Trade
Unions
U of China are the mass organization of the working class led by the party and are the
transmission
t belts between the party and the masses”3. Therefore, although the unions played
a variety of economic and political roles, their role as a communication channel between the
party and workers was the most central. The trade union focused on day-to-day shop-floor
problems, educating the workers, ensuring the success of the enterprise, and ensuring that the
management of the enterprise did not exploit workers. They dealt with matters such as griev-
ances and decisions regarding social activities. Workers congresses (composed of representatives
of workers) met about four times a year and had the responsibility for decisions on enterprise
M03_SING6013_01_C03.indd 56 6/17/10 1:54:32 AM

funds for welfare activities, changes in organizational structure and payment systems, and the
election of the enterprise director and other key management personnel.
3.7 Industrial Relations in Japan

The Japanese industrial relations system is an institutionalized one and has historically
included workplace-focused enterprise unions, lifetime-employment systems, broad-based
training, and seniority-based wages. One of the key outcomes of the Japanese IR system,
when examined in conjunction with related Japanese institutions such as the keiretsu system
and the system of production organization (sub-contracting and quality-focused, team-based
work) is the simultaneous achievement of stability in labour-market terms and consider-
able functional flexibility in workplace-level industrial relations through the development of
internal labour markets.

PRIOR TO THE 1990S. The institutionalization of the Japanese industrial relations
system can be assumed to have originated as early as the late 1800s in the silk industry
where employers, forced to compete for scarce labour, instituted lifetime employment to
create stable employment conditions. However, it was the large-scale conflict between
labour and capital in the early post-war years, partly in response to many workers being
made redundant as the war industries shut down coupled with the revolution in produc-
tion management, that encouraged the institutionalization of lifetime-employment prac- The concept of lifetime
tice in the Japanese industry. The institutional structures that provided stable internal employment is changing in
Japan too. Globalization
labour markets also provided Japanese employers a high degree of functional flexibility has had its impact on
in the use of human resources, as lifetime employment, firm specific training, and enter- many employment-related
prise-based unionism became widespread. Thus, the Japanese industrial environment practices, for example, hir-
became characterized by highly functionally flexible IR systems within firms, in a con- ing practices, limited-term
text of a fair degree of rigidity in the labour market. The development of internal labour employment, employment
contracts and outsourcing.
markets and lifetime-employment systems created a highly segmented labour force, with Japan is no exception.
little inter-segment mobility.
THE RECENT CHANGES. The recession of the 1990s led to the questioning of the
lifetime-employment concept, with severe declines in job security on an unprecedented
scale. Changes were seen in the hiring practices with a dramatic increase in outsourcing
strategies, the introduction of limited-term-employment contracts for some occupations,
increased wage flexibility, and some degree of union restructuring. These changes sug-
gested a gradual adaptation of the economic circumstances. There was evidence of a sud-
den and dramatic increase in outsourcing within Japan, termed “work commissioning”.
This resulted in an increase in wage flexibility, resulting in reducing the power of the trade
unions.
3.7.2 Trade Unions in Japan

Trade Unions in Japan are mostly organized at the enterprise level. These enterprise unions,
in turn, are affiliated to a federation of unions relevant to the same industry. The third level
is the organization of such federations into a national confederation. Apart from this, there
are two other independent federations covering respectively metallurgy, and chemical and
energy sectors.
Enterprise unions are mostly autonomous. One of the two major federations in
Japan, based on size, is Japanese Trade Union Confederation (Rengo). It was a result of
efforts at restructuring the federations that were in existence then. Rengo was formed
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58 Part I Context
i 1987 after efforts of several years starting 1982. It covers round about 65 per cent
in
Industry Union
of unionized workers. The initial membership of Rengo was 5.6 million, mostly com-
o
In this form of organi- prising employees from the private sector. Later, in 1989, many public-sector units
p
zation, the workers in
the same industry are
jjoined Rengo. The second confederation, the National Confederation of Trade Unions
organized into the same ((Zenroren), represents only around 9 per cent of all unionized workers. Although reor-
union, irrespective of their gganizations within the federations are going on, the overall membership of unions has
skills. been steadily declining.
b
COLLECTIVE BARGAINING. As seen in the above paragraph, in Japan, the

unions are organized at enterprise, industry and national levels. At present, there
is no legislation in place that governs the process of collective bargaining in Japan.
However, traditionally, it has been taking place at the enterprise level and has become
a practice. Normally, most of the issues concerning working conditions, wages and
personnel policies are discussed and negotiated at the enterprise level. However, the
industry union, at its level, decides on a wage level to be negotiated, based on the best
pay levels in the industry. The industry-level unions also take a more strategic role
in deciding the overall industry-level targets on wages, industrial action plan, etc. so
as to strengthen the collective bargaining strength. In an indirect way, this helped in
maintaining a kind of industry-level parity across different enterprises. In recent years,
however, with increasing competition and sluggish growth, the unions have not been
very successful in maintaining parity as the wage increase is dependent on the perfor-
mance of the individual enterprise.
3.8 Industrial Relations in South Korea

The Korean industrial relations system evolved primarily after the 1953 legislation regard-
ing trade unions after the war. The rights granted to trade unions, however, were revoked
during the 1960s period and thereafter. During the 1945–1960 period, workplace indus-
trial relations in the major conglomerates known as the “chaebol” was closely modelled on
the Japanese system, and were either paternalistic or authoritarian. The primary charac-
teristics of the system were paternalistic where the interests of the State and the employer
were assumed to also take care of the interests of the workers. This was aimed towards the
prevention of industrial conflict that might threaten the prosperity of the chaebol and,
thus, economic development. The State also mandated labour-management councils in
every enterprise, introduced tripartite commissions at provincial (district) levels to resolve
disputes (these commissions grew out of the 1953 legislation), and promulgated laws that
restricted direct action by labour.
PRIOR TO 1990. 1981 witnessed a change in economic-development strategy towards

higher value-added exports, which resulted in more changes in industrial relations legisla-
tion. Legal changes mandated the formation of enterprise unions, although it was made
mandatory for these enterprise unions to be a part of FKTU, a union confederation cre-
ated under the mandate of the government. This ensured a kind of indirect control over
the enterprise unions. Chaebols, thus, continued with the paternalistic management and
the stated objective of conflict avoidance was achieved. Although there were some efforts
to introduce some labour-protection laws and regulate vocational and skills training, the
primary focus was political control of IR activity, i.e., stability. During this period, there-
fore, conflict prevention and conflict avoidance became the stated objective, and all actions
purported to achieve that as part of the overall goal of maintaining stability in industrial
relations for economic development (e.g., in particular, the government’s efforts to control
wage costs), and political control.
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THE RECENT CHANGES. With democratization in 1987, industrial relations

legislation and practice have changed substantially. With the liberalization of labour law, the
trade-union movement mushroomed, with a sharp increase in union density and strikes dur-
ing the 1987–1989 periods.
The scope of bargaining expanded substantially, and trade unions, confronted with
a management unused to collective bargaining, have been able to use their economic
power to win substantial nominal wage increases Bargaining power, thus, appeared to be
with the unions in the years immediately following democratization. Given the erosion
of their competitive position, Korean chaebol reacted to the militant union demands by
following a mixture of suppressive policies and progressive HR practices, although these
practices were introduced by only some of the chaebol (e.g., LG promoting labour-man-
agement collaboration.). These changes happened in the early 1990s, despite the employ-
ers calling for the need to cut labour, given the increases in costs. The State initially tried
From the paternalistic and
to inject some wage moderation through the articulation of wage norms with little suc- totalitarian orientation
cess, as different chaebols adopted different strategies of dealing with the union. during the dictatorship,
The erosion in competitive position in the mid-1990s saw the increase in Korean South Korea experienced a
investment abroad in low-cost areas, particularly in Asia and Latin America. As Korean greater need for participa-
exports and profits started to decline during the 1994–1995 period, employers began to tion by the employees.
Competitive forces forced
step up their demands for industrial relations restructuring, to make workplaces more fl ex- employers to demand
ible, and to get rid of the implicit lifetime-employment contract (or norm) that existed in restructuring in the IR
the large chaebol. The diversity of employer strategies increased as they sought to restruc- system. The Asian Currency
ture IR and HR. The government in 1996 introduced a few labour reforms to tackle union Crisis hastened the process
militancy. It allowed union participation in politics and multiple unions; no new federa- for fundamental changes
with tripartite involvement
tion was to be recognized till the year 2000. This increased the authority of the employers in the policy. The IR system
to lay off employees. These changes resulted in widespread labour agitation and strikes. in Korea is still in the transi-
In general, the nine years following democratization can be characterized as a period of tion phase, adapting to the
experimentation and diversification in industrial relations practice and regulation. global practices.
However, the Korean industrial relations continue to be in a period of transition, wit-
nessing a lot of experimentation with institutions, and a high degree of diversity in prac-
tices. The transition to democracy in Korea coincided with, and to some extent hastened
the need for, increased flexibility in industrial relations, as Korean competitiveness in sev-
eral sectors eroded.
3.8.2 Trade Unions in South Korea

The early 1990s witnessed the breaking down of the hegemony of the FKTU, as new inde-
pendent unions formed and some of them created the KCTU in opposition to the FKTU.
In the late 1990s, however, there were several divisions in the unionized set up. On the one
hand, some unions, notably those affiliated with the FKTU, advocated moderation, given
the needs of Korean competitiveness, but the independent unions that started forming
around 1991 and finally grew into the KCTU in 1995 (which was illegal and continued to
be so until 1999), were not in agreement with the policies of the FKTU.
As a consequence of the 1997 legislation permitting the formation of new unions, the
number of industrial unions is growing, even though industrial-level bargaining has been
resisted by the employers. Clearly, however, numerical flexibility has become a key aim for
the Korean employers, while job security has become a key goal of the Korean unions, during
the decade of the 1990s.
3.9 Industrial Relations in Singapore

Singapore’s industrial relations system is well known for its distinctive tripartite fea-
tures, and is considered both functional and flexible. Upon adoption of its export-
oriented industrialization programme, based on foreign investment in the 1960s, the
M03_SING6013_01_C03.indd 59 6/17/10 1:54:33 AM

60 Part I Context
focus of industrial relations policy in Singapore was to provide foreign investors with
a “stable, cheap, and flexible industrial relations system”. Low cost of labour was a big
advantage in the 1960s, as was stability. The twin factors were to attract foreign invest-
ments initially. Carefully thought out institutional support were put in place so as to
promote stability and industrial peace. A tripartite industrial relations structure with
joint decision making on all aspects of economic and social development helped usher
in an environment of stability. The State provided funds and training on development
issues so as to lay the foundation for “responsible” unionism. To ensure that disputes
did not result in strikes, the legislation provided for secret ballots on strikes, a notice
period, and withdrawal of strikes once the dispute was under mediation or conciliation
proceedings. An industrial arbitration court was established to deal with disputes not
settled through discussions or mediation. Strikes were prohibited in industries deemed
essential for economic development. To create stability in wage negotiations, the tri-
partite National Wages Council recommended standard wage increases across the
industries. At the workplace level, a few contentious issues that impacted the opera-
tional flexibility and efficiency were kept out of the bargaining (transfers, promotions,
termination, hiring, etc.). Besides reducing scope for disputes, this also provided to the
employer flexibility and substantial control over the operational decisions. The State
has been making continuous and focused efforts towards competence building of the
working population through labour enactments and the setting up of institutions for
the same.
3.10 International Trends

Globalization and free trade have witnessed three major industrialized hubs and economic
powerhouses, namely, North America (USA), the European Union and Japan. These key
regions have become kinds of benchmarks for industrial systems, including the industrial
relations systems. Their economy, state of employment and social-development outcomes
are key areas for benchmarking for the countries in other regions. Apart from nation-
specific factors that shape the differences in industrial relations, there are forces such as
globalization, industrial peace and the desire to protect employment and income that
are common across geographies and economies. An interplay between these forces have
thrown up a few distinctive trends:
The decline in union membership across the industrialized-market economies. This
Emerging International could be because of the fall in employment in the traditional high-employment
Trends in IR sector like manufactuting. Manufacturing, traditionally, had high unionization,
whereas the unionization in the service sector has been low. The union density, too,
The decline of union
membership and has declined.
union density Trade unions, to offset their decline, are increasingly trying to consolidate and
Consolidation and merge.
merger of trade unions
Variations in collective- A variation exists across nations in collective bargaining practices. These practices,
bargaining practices in a large measure, are determined by the political economy and the ideology of the
A shift in the relation- political party in power.
ship from the employ-
ers’ organizations The focus of the employer is now on individual employee involvement rather than
and trade unions to collective involvement, which means reaching the employee directly rather than
the employer and an through trade unions.
individual employee
Organization restruc- Increasing corporate restructuring through mergers, acquisitions, outsourcing
turing the emergence of processes, divestments, joint ventures, closures, etc. This structural change
of “atypical” forms of could be the industry’s coping mechanism to the forces of globalization and
employment
fierce competition. These structural changes impact the employment, both in
the number of jobs and the nature of jobs. The outsourcing of CRM has created
M03_SING6013_01_C03.indd 60 6/17/10 1:54:33 AM

a large number of jobs in India and has also brought in many issues relating to
conditions of employment due to the change in the nature of jobs. Globalization
has also, in its wake, strengthened a movement for globalization in labour stan-
dards too. These issues are being addressed by different countries in different
ways depending on the existing system in place and the local political processes
for managing change. In many places, including India, the regulatory framework
for adapting to these changes is under transition, and this transition period may
throw up issues that may impact future IR systems.
Competition is forcing employers to restructure the nature and forms of employment.
Contractual, part-time work, flex-times, work-from-home, virtual office, professional
service are a few such emerging trends that have impacted the industrial relations
already.
SUMMARY
In most of these countries, the initial primary goal of the The IR systems of these countries experienced long
industrial relations system was to maintain labour peace periods of stability before the dramatic and, in some cases,
and, more generally, industrial stability. The stated rationale fundamental changes of the 1980s and 1990s. Most of the
for the need for stability varied from nation to nation. For major changes in the industrial relations systems have been
example, in India, the rationale was to channel conflict away in the last decade. In some countries, the changes in IR and
from strikes to third-party-dispute-settlement mechanisms, HR can be seen in legislative changes, but often, change is
given that strikes were seen to hinder economic development. manifested in the strategies of the political parties leading
In Singapore, industrial conflict was seen as a deterrent to the government. The underlying compulsion inevitably has
foreign investment, while in South Korea, there were apparent been increased competition on account of globalization
political imperatives for industrial relations stability. generating a need for greater numerical and functional
flexibility.
In many countries, the industrial relations system began to
be institutionalized only in the post-war period, coinciding
with independence for some of the countries.
KEY TERMS
AFL-CIO 53 industry union 58 Thatcherism 50
craft union 53 shop stewards 51 trade union congress 51
REVIEW QUESTIONS
1 European firms have tended to deal with labour unions at 3 Compare the industrial relations scenario in Asian countries
the industry level (frequently via employer associations) and those in the European Union.
rather than at the firm level. Give reasons based on your
4 Explain how the national history and culture influence in
knowledge of the industrial relations system in the EU
creating the industrial relations system of the country.
countries.
5 Discuss the emerging global trends in industrial relations.
2 The United States has one of the lowest union-density rates
What are some of the factors driving these changes?
in the Western world. What impact would this have on
industrial relations? Discuss other aspects of the industrial
relations system in the USA.
M03_SING6013_01_C03.indd 61 6/17/10 1:54:33 AM

62 Part I Context
1 Critically evaluate the statement—‘ “Workers of the world 3 Make a comparative chart bringing out the salient features
unite!’ is a slogan which was never so relevant as it is today!” relating to the IR systems of the major economies of the
world. What common features do you find?
2 Multinationals generally delegate the management of labour
relations to their foreign subsidiaries because national 4 With the onslaught of internationalization, globalization
differences in economic, political, and legal systems produce and competition, soon there would be a globalization of
markedly different labour relations systems across countries. Do industrial relations practices too. Discuss why or why not
you think it ia an appropriate strategy? How can they ensure a this is possible.
congruency with their corporate labour relations strategy?
D E B AT E
1 Time has come for forcing uniformity in the industrial rela- 2 Trade unions in India have become largely redundant
tions structures in all industrialized countries. This is essen- in the organized sector. This is a welcome development.
tial for promotion of free trade amongst nations. In the light Discuss.
of what you have learned till now, bring out arguments for
and against the statement.
Labour Trouble in Nepal of the Maoists, is asking NKM Beverages to give permanent
employment to seasonal workers who have been employed for
A soft-drink manufacturing unit of a New Delhi-based
over 240 days, with sick leave and other facilities. The protest
businessman, N. K. Mishra, ran into labour trouble with
was reportedly triggered by the company’s directive to the
angry workers protesting outside the NKM office trouble in
temporary employees to go on “unpaid leave” during off-season.
Nepal. The NKM, which has interests in real estate, retailing,
hospitality and education, also has stakes in the XYZ beverages What would be your advice to deal with this IR problem?
industry. Although Maoist guerrillas have made their peace
Industrial Relations at McDonald’s
with the government, giving a respite to businessmen who
had been bearing the brunt of bomb blasts, extortion and McDonald’s is basically a non-union company.
shutdowns, the beverages industry has come under attack from
Collect information on the industrial relations practice followed
the labour union affiliated to the Communist Party of Nepal.
by McDonald’s in different countries where it operates.
The communist union, in a bid to nip the growing popularity
NOTES
1 Industrial Relations in Europe (2006), European Commission, in Human Resource Management and Industrial Relations
Directorate-General for Employment, Social Affairs and Equal in Asia, No. 3 (Sydney: University of New South Wales
Opportunities (http://ec.europa.eu/social/keyDocuments.jsp). Press, 1994).
2 Greg O’Leary, “The Contemporary Role of Chinese 3 Frederick C. Teiwes, “The Chinese State During Maoist
Trade Unions” in Sukhan Jackson (ed.), Contemporary Era,” in David Stanbaugh (ed.) The Modern Chinese State
Developments in Asian Industrial Relations, UNSW Studies (Cambridge: Cambridge University Press, 200): 105–160.
SUGGESTED READING
Annual Reports of European Industrial Relations Observatory Brown, Clair, Yoshifumi Nakata, Michael Reich, and Lloyd
(EIRO), 2008, 2007, 2006 (http://www.eurofound.europa.eu/eiro/ Ulman, Work and Pay in the United States and Japan (New York:
annualreports.htm). Oxford University Press, 1997).
M03_SING6013_01_C03.indd 62 6/17/10 1:54:33 AM

Chew, S. B. and Rosalind Chew, “Impact of Development Strategy Industrial Relations in Japan 2003–2004, European Industrial
on Industrial Relations in Singapore” in Anil Verma, Thomas A. Relations Observatory Online
Kochan, and Russell Lansbury (eds.) Employment Relations in the
Kaufmann, B. The Global Evolution of Industrial Relations
Growing Asian Economies (London: Routledge, 1995), pp. 158–193.
(Geneva: ILO, 2004).
DeSousa, Valerian “Colonialism and Industrial Relations in
Leggett, C. “Korea’s Divergent Industrial Relations”, New Zealand
India”, in Sarosh Kuruvilla and Bryan Mundell (eds.), The
Journal of Industrial Relations, Vol. 22, No. 1, April 1997.
Institutionalization of Industrial Relations in Developing Nations,
Venkatratnam, C. S. Globalization and Labour Management
Erickson, Christopher L. and Sarosh Kuruvilla, “Industrial
Relations: Dynamics of Change (New Delhi: Sage Publications,
Relations Implications of the Asian Economic Crisis”, Perspectives
2002). Questions for Critical Thinking
on Work, Vol. 2, No. 2., 1998, pp. 42–48.
Gordon, Andrew The Evolution of Labor Relations in Japan:
Heavy Industry, 1853–1955 (Cambridge, MA: Harvard
University Press, 1985).
M03_SING6013_01_C03.indd 63 6/17/10 1:54:34 AM

chapter four
4.1 The Changing Characteristics of Industries After reading this chapter, you will be able to:
4.2 The Changing Characteristics of the • Describe the changing characteristics of the
Industrial Workforce Indian labour force over a period of time
4.3 The Demand for Labour • Appreciate the need for maintaining
4.4 The Challenges to IR industrial relations for production,
productivity and performance management
from the employer’s perspective
• Understand the reason behind the paradigm
shift towards employee relations
• Relate the changes in industrial relations
with economic and social changes
• Identify the concerns in the context of the
trade union’s role in the current economic
scenario
• Understand the different forces that have
led to the changes in industrial relations in
India
• Identify approaches for smooth, harmonious
and healthy employee relations
Go, Get a Life
Technological innovation has speeded up bank transactions, in the process, reducing human drudgery and the possibilities
of human error. Banking operations have become more customer-friendly and flexible. Approaching the concerned bank
branch has become multi-channelled, and more and more customers are finding little need to visit the bank. The employees
today would not even remember the earlier 10-to-5 routine of a bank and dealing with harried customers during “public
hours” from 10 a.m. to 2 p.m. Instead of dedicated tellers earlier, the bank staff must multi-task between front desk, a teller’s
job and maybe a few others. Go to any of the modern banks today and look at the long hours of monotonous jobs being
performed by the employees just because wafer-thin margins have made it necessary to raise productivity. On the other
hand, the aspiring employee, today, is largely from generation X or generation Y, from a nuclear, urban family, and with
aspirations of much more than just being a wage earner from the “traditional” or “baby boomer” generation. He would not
like to be slotted as an industrial worker, but would like to be a part of the mainstream hierarchy. Work–life balance, enough
earning to satisfy an urban lifestyle, a meaningful and flexible job, good work environment, scope for training and learning,
quick promotions may be what they look for.
Recently, the HDFC Bank exhorted its employees to “go, get a life”. The bank does not want its employees to spend too much
time in the office. All employees have been told to shut down their computers about two hours after close of banking. They
are encouraged to leave early also so that they spend quality time with their family and friends. Those who stay back late
have to give an explanation!1
While the concern of the bank for its employees is laudable, is it entirely for altruistic purpose? Alternatively, is it some kind
of balancing the bank is attempting, to cope with increasing productivity and to prevent attrition? Apart from the changes
in the business environment, has the profile of the employees changed too?
M04_SING6013_01_C04.indd 64 6/21/10 4:07:04 PM

The Changing Characteristics of
Industry and Workforce in India
The changes in social and economic environment, demographics, globalization and technological develop-
ments have thrown up new challenges for employee relationship management.
The banking industry in India has undergone a sea change within a decade. So have many other
industries in manufacturing and service sectors. Information and communication technologies have
fundamentally transformed the business processes and work practices and generated demand for a
labour force much different in age, knowledge, skills and attitude profiles. Many new industries have
emerged. The service sector now comprises approximately 55 per cent of the economy. The mixes in
the mixed economy have undergone change. Global practices are sweeping the industry bringing in
their wake wholesale changes in work practices, employee profiles, working conditions, benchmarks
for performance and individual aspirations. The industry has been assimilating these changes and, in
the process, the interface dynamics amongst the players, namely, the employer, the employees, their
organizations, and the government, too, have been adjusting.
The characteristic features of industrial employment determine the industrial relations climate.
4.1 The Changing Characteristics of Industries

Technology changes, more so in the last two decades, have resulted in mechanization, automation,
information-based services and disintermediation in most industries.
This has led to:
i) The rationalization of manpower
ii) Labour substitution in the case of automation
These changes impact the work and task design, enabling people to improve the work procedures,
which indirectly have an impact on the social and the economic status. The use of more sophisticated
machineries or tools and techniques leads to a reduction or substitution of labour deployed for want
of a higher-level skill. Taking an adversarial approach in the implementation of such labour-displacing
initiatives resulted in industrial relations problems and conflicts.
Technological changes are brought about in industries to enable them to compete through
improved efficiency and productivity, and at times, it may be a means of survival of an enterprise.
Social implications and priorities do not have much role to play when deciding on technological
changes. Technological changes in organizations, therefore, are almost always viewed with appre-
hension by the employees who fear for job security, retraining capabilities and career prospects. The
effect on employees is both social and economic. Obviously, therefore, changes in technology have a
powerful impact on the industrial relations front in the following manner:
i) Work intensification and more output and productivity demands
ii) Absence from work not only entails loss of man-days but also cost of idle capacity
ii) Rationalization of manpower and the consequent reduction in employment levels
M04_SING6013_01_C04.indd 65 6/17/10 1:55:36 AM

66 Part I Context
iv) Changes in work organization and structural relationships

Result of Changes in
Technology: v) The size of work groups
Mechanization vi) The length of job cycles
Automation
Information-based vii) Changes in work environment and occupational adjustment to the same
Services
viii) Retraining and redeployment potential of existing employees
Disintermediation,
which, in turn, has ix) Skill requirement—more multi-skilling
led to:
䊊 rationalization of x) Resistance to transfers and job rotation
manpower, and
xi) The level of job satisfaction—with individual differences
䊊 labour substitu-
tion in the case of Technological
T changes, therefore, impact both quality of work-life and quality of life. It is
automation. bound
b to create apprehensions, and a resistance to change the old order. It appears logical
that
t participation and consultation with labour would be the way to go for a smooth intro-
duction
d of changes in technology. Wherever management refrained from transparent and
open
o communication, the transition has not been smooth. Major forces driving the changes
Disintermediation in
i the last decade and a half can be discussed under the following heads.
In the current context, it
means the removal of an T HE I M PACT O F C O M P UT E R I ZAT I O N. Revolutionary changes in infor-
employee’s role between mation
m technology, telecommunication and a marriage of the two have resulted in complete
the customer and the transformation
t and re-engineering of business processes, and industries have exploited this
product or service. ATMs,
for example, enable the
development.
d In the process, industries and businesses have adapted to more efficient pro-
customer to avail of the cesses
c and a different kind of division of labour. There has been a change in the demand of
service without going skill
s sets with greater requirements of knowledge workers and technology specialists. To fill
through a bank teller. this
t demand, there has been a movement towards skill enhancement for categories such as
Information technology engineering,
e sciences, solicitors, pharmacists, economists, computer-hardware and software
has enabled organizations
to adopt disintermediation
technicians.
t With a booming service sector and service being recognized as a differentiator,
in a big way. there
t has also been an increasing demand for skills at the delivery end, e.g., logistics special-
ists,
i drivers, CRM specialists, service engineers, security specialists, and air and ground crew.
It
I is the generalist, middle-level, white-collar category that has taken a beating. “Whole Jobs”
have
h been broken into “tasks” and each of these tasks de-criticalized. When computerization
Rationalization resulted
r in elimination of jobs or replacement of manpower for want of computer skills, trade
of Manpower unions
u were aggressive in their approach demanding redeployment through training, instead
Strictly, it means bring- of
o replacing existing labour. This situation led to the tripartite discussions of 1966 and 1967
ing the manpower in
i the 24th and 25th session of the ILC (Indian Labour Conference). As no conclusion could
requirements of a firm be
b reached, computerization was a controversial issue among trade unions for quite some
to optimum levels. In
practice, however, it time.
t In January 1983, the government of India came up with a Technology Policy Statement
largely means measures (TPS)
( that emphasized on the dual objective of technology—to provide maximum gainful
to reduce redundant and
a satisfying employment to all strata of society and steps to reduce drudgery. The Seventh
manpower through Plan,
P however, was more emphatic in stating the need for modernization, but emphasized
redeployment, voluntary the
t need to explore how this could be achieved without affecting the industrial relations
separation schemes,
outsourcing, etc. climate.
c
T HE I M PAC T O F AUTO M AT I O N . Automation in India emerged as part of the

modernization
m of industries. Its impact was determined by the extent of labour augmentation
Technological changes or
o labour displacement. The new industries, starting off with automation, faced with little or
affect labour in two n
no resistance. The central trade unions opposed automation only if it would affect employ-
ways—social and eco- ment.
m Automation of housekeeping services in the airports as part of the global tendering
nomic, thereby affecting process
p by Airport Authority of India was faced with stiff resistance by the trade unions, who
the quality of life in all
spheres. struck
s work to raise this issue.
T HE I M PAC T O F R AT I O NALI ZAT I O N O F M ANPO W ER . The need

for rationalization of manpower emerged as a consequence of the comparatively low labour-
productivity levels in Indian industries. The aspect of carrying “surplus labour” to cope with
M04_SING6013_01_C04.indd 66 6/17/10 1:55:36 AM

The Changing Characteristics of Industry and Workforce in India 67
absenteeism was making most industries burdened with additional labour costs. When
Automation
rationalization was introduced, there was opposition on the part of the workers and trade
unions for the fear of losing jobs. The Planning Commission and the Ministry of Labour It is the use of control
imposed safeguards in the form of fixing work loads, recruitment freeze, voluntary retire- systems or computers
used to control industrial
ment schemes, and facilitating productivity-sharing gains for workers through higher wages. machinery or processes
The Second Five Year Plan and the Model Agreement adopted in the 15th session of the ILC replacing human opera-
in 1957 introduced some regulations that made rationalization possible only if it did not lead tors. Automation greatly
to unemployment. The emphasis, therefore, was to identify redeployable surplus and provide reduces the need for
redeployment training to engage them in suitable jobs. human sensory and men-
tal requirements.
THE IM PACT O F GLO BALI ZAT I O N. The process of globalization and the
opening up of the economy, post the economic reforms, focused the need to gain competitive
The choice to adopt a new
advantage. Competitive advantage through people was an important dimension. Essentially, technology is least gov-
it meant flexibility in employing labour as per requirement (shorn of all jargon, this meant erned by social priorities.
freedom to hire and fire). For PSUs, it immediately meant a need to assess the requirement of Hence, the initial reaction
manpower as per business needs and, as a reaction, a complete recruitment freeze. Downsiz- of employees to the intro-
ing in the best of times is difficult; more so, in a PSU. In perpetually loss-making PSUs, the duction of new technology
is one of apprehension
unions leant a passive support to “voluntary” retirement schemes. It must be acknowledged about job security, retrain-
that with the onset of economic liberalization, there were sincere efforts to find a solution ing capabilities and career
through tripartite discussions. prospects.
4.2 The Changing Characteristics The major forces in the

of the Industrial Workforce last decade and a half
driving the changes can
The changing face of the Indian industry has an obvious impact on the labour market, more be categorized as:
so in India, which has serious unemployment issues to deal with. The dynamics of the above Computerization
changes and its impact on labour need to be understood against the historical characteristics Automation
of the labour force, which have been discussed in the next few sections to facilitate under- Rationalization
standing the changing face of the Indian workforce. Globalization
4.2.1 The Indian Workforce Prior to the Recent Changes Globalization

The Indian labour force has been traditionally characterized in the following ways: It refers to economic
i) Driven by unemployment, willing to work for low wages in organized or unorga- integration of national
economies into the
nized sector international economy
ii) Heterogeneous in composition but spontaneously divided by religion, caste, com- through trade, foreign
direct investment, capital
munities, ethnic groups and language flows, migration, and
iii) Initiation from migrant and displaced population from the rural areas, mainly the spread of technology.
uneducated and those low in the social strata
iv) Mine workers predominantly from tribal areas The industrial change has
v) Neither organized nor stable working class, as they continued to go back to their affected the labour mar-
ket in the following ways:
rural roots by taking breaks in employment
Changed occupational
vi) Primarily male-dominated; women workers employed in unorganized sectors where structure
skill requirement and wages were low Changed nature of work
vii) Working class undifferentiated by industry or sectoral origin Integrated job markets
leading to a global
viii) A high rate of absenteeism and turnover, as more importance given to partaking in occupational structure
family, social and religious activities at the cost of their responsibility towards pro- Improved education
duction and productivity facilitating economic
growth
ix) Low on commitment
M04_SING6013_01_C04.indd 67 6/17/10 1:55:37 AM

68 Part I Context
4.2.2 The Impact of Industrial Change on the Workforce

THE CHANGING OCCUPATIONAL STRUCTURE. Technological changes, auto-
mation and computerization have resulted in a change in the occupational structure. The infor-
mation revolution, communication technology and automation have brought in wholesale
changes in the nature of occupations, a shift of occupations, primarily manual or clerical in
nature, to those involving intellectual work. The end result is the emergence of a global occupa-
tional structure with an increasingly integrated labour market.
T HE CH ANG I NG NAT UR E O F WO R K . Technical changes in the last decade

have placed an increasing demand on multi-skilling and have also necessitated special-
ized skills, adapting to the industrial requirements and technical changes. The skill-biased
technical change has altered work environment. It has transformed the nature of work and
its content. The changes are at individual as well as organizational level, and this impacts
employment structures and labour markets. Flexi-work schedules, outsourcing jobs and the
creation of boundary-less and virtual organizations are new emerging trends. This has also
led to an increase in “service”-oriented and “knowledge”-oriented jobs. Unskilled, manual
jobs have declined. The work content of jobs has changed leading to new demands in terms of
knowledge, skills and behaviour. In view of rapid technical changes, in many cases, the focus
is now on attitudes and the behaviour of people with technical capabilities, renewed continu-
ally through training provided by the company.
INT E G R AT E D J O B M AR KE T S LE AD I NG TO G LO B A L O C C U PA -
T IONAL ST R UC T UR E . An integrated global economy has increased the supply
of labour significantly. Productivity gains due to technological changes have created higher
wages and incomes. The resultant cost increases have led to offshore outsourcing of data-
intensive work. The intense competition has resulted in the integration of job markets.
HIG H E R E D UC AT I O N AND E C O NO M I C G R O W TH. Technological

changes, automation and industrial restructuring have made knowledge the key factor in
economic development. The emerging workforce will be the knowledge technologist creat-
ing competitive advantage as human capital. This transformation has both increased and
updated the skills required in an economy. This implies that the education system has to be
attuned to the development of vocational skills. This is being experienced at the industry level
where the employers lament the unavailability of “employable” labour, despite the availability
of “qualified” labour. This means although people may have the required academic qualifica-
tions, they may not have sufficient technical or soft skills, so essential for employment. As
a consequence, the skilled manpower is exercising multi-entry and multi-exit options. The
industry is taking the lead in providing training opportunities for skill development to retain
talent, thereby increasing employee involvement. An employee–employer relationship is get-
ting established eliminating the need for a collective representation of employees. Indirectly,
this has moved trade unionism to the periphery and the concept of “industrial relations” is
being substituted by “employee relations”.
4.2.3 The Factors Facilitating Adaptation to Changes

The adaptability of the Indian workforce to the changing characteristics of the Indian indus-
try was facilitated by the following factors:
i) Indian workers, today, are more urbane than the previous generations
ii) The obligatory link with the place of origin (village) has reduced and, hence, they are
more stable than transitory
iii) Workers are more focused on the present occupation than on the land-related, eco-
nomic interests in their places of origin
M04_SING6013_01_C04.indd 68 6/17/10 1:55:38 AM

iv) Workers prefer domiciliary to State citizenship and, hence, more stable in
employment
v) Workers are more skilful and educated
vi) Women employment is on the rise
vii) Workers are high on job commitment for self-interest and growth
viii) They are more mobile and on the lookout for better opportunities within and out-
side the country
Further, the emerging situation as regards employment makes it very clear that individu-
als have to also train and develop themselves to gain competitive edge, and the collective
strength of trade unions will no longer be the push factor that can ensure their employability
for long. The unions have also been appreciative of the economic growth and its effect on the
standards of living and, hence, have not been raising demands that could affect growth and
development of the country.
4.2.4 The Current Employment and Unemployment

Situation
A report prepared for the Planning Commission2 observes that any vision of the future has
to be rooted in the current reality, and policies and processes have to be identified to bridge
the gap between the current reality and the future vision. The current reality regarding labour
and employment is summarized as:
In the year 1999–2000, 7.32 per cent of the labour force was unemployed. In absolute
terms, the number of unemployed stood at 26.58 million.
Subsistence Worker/
Among the employed, the proportion of poor is as high as in the population at large, Employment
suggesting a large proportion of workers engaged in subsistence employment. Subsistence workers are
Only about 8 per cent of the total employment is in organized sector. More than those who hold a self-
employment job, and in
90 per cent are engaged in informal sector activities, which are largely outside the this capacity, produce
reach of any social-security benefits, and also suffer from many handicaps in the form goods or services that are
of limited access to institutional facilities and other support facilities. predominantly consumed
by their own household,
The educational and skill profile of the existing workforce is very poor. and constitute an impor-
tant basis for its livelihood.
How will the above reality impact the current industrial relations, especially in the organized
sector?
Participation Rate
4.2.5 The Composition and the Demographic The proportion of people
Features of the Workforce in the labour force out of
total cohort population
There have been changes in the composition and the demographics of the workforce, and this
will have a bearing on the industrial relations, may be the beginning of a new course. In 1999–2000, 7.32
per cent of the labour
force, i.e. 26.58 mil-
A GE . The proportion of different age groups (as measured by Participation Rate, which lion, were unemployed
is the proportion of people in the labour force out of total cohort population) has under- A large proportion of
gone a change. The dynamics created by the labour-force composition impacts production, those employed are in
productivity and innovative transformations in the industry. There has been a decline in subsistence employment
participation rates observed during 1993–94 to 1999–2000. As shown in Table 4.1, there is Only 8 per cent of
maximum decline in participation rates for younger age groups (20–29) in 1999–2000, but it those employed are in
the organized sector
has climbed back to more or less the 93–94 level in 2004–2005. On the other hand, with an
The education and the
extension of retirement age to 60 in the organized sector, older people are active participants skill profile of the cur-
in the labour force. Participation rates across all age groups have remained the same since rent work force is poor
1993–1994 level except for a minor dip in 1999–2000 in the younger age groups.
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70 Part I Context
Table 4.1
Workforce participation Urban
rate according to age Age Group Male Female
group (WFPR).
Year 1993-94 1999-00 2004-05 1993-94 1999-00 2004-05
5-9 4 3 3 4 2 3
10-14 71 52 53 47 37 35
15-19 404 366 381 142 121 144
20-24 772 755 769 230 191 250
25-29 958 951 957 248 214 261
30-34 983 980 987 283 245 308
35-39 990 986 984 304 289 340
40-44 984 980 983 320 285 317
45-49 976 974 976 317 269 269
50-54 945 939 939 287 264 259
55-59 856 811 832 225 208 218
60 & Above 443 402 366 114 94 100
All (0+) 542 542 570 164 147 178
Source: Ministry of Statistics and Programme Implementation, Government of India
The main changes in G END E R . Females are closing the gap with respect to males in labour participation.
labour demographics Table 4.1 also shows an increase in participation rate for females up to the age of 40. One
include: implication of this on IR could be arising out of the fact of low mobility of women and their
The decline in par- reluctant participation in trade-union activities. With progressive lowering of the gap, the
ticipation rates across issues taken up by employees’ organizations may undergo a change, and so would the work-
age groups place practices.
The entry of the
younger age groups SKILLS. It is generally accepted and borne out by data that education level of labour in
into the labour force
India is low. The Economic Survey of 2007 revealed that about 44.0 per cent of all workers
More active participa-
tion of older people in
in 1999–2000 were illiterate and another 22.7 per cent had schooling only up to the pri-
the labour force mary level3. For an effective industrial relations system to prevail, the working groups need
A reduction in differen- to be educated and mature to establish a productive and collaborative relationship with
tials between male and management. In the earlier passage, we have noted the changes in the demanded profile of
female participation labour due to changes in the nature of business and industry in India. More and more jobs
Relatively low educa- today demand educated and skilled workers. The level of craft or occupational unioniza-
tion and skill levels tion in India is low, it being more dictated by the nature of the industry, geography or even
An attitudinal change ideology. To meet the new demands of the job, the level of education and skill formation
towards technical and
vocational courses
must increase. The inability to bridge this gap will create its own dynamics. The NSSO esti-
mates of skilled labour is given in Table 4.2.
Though very old, the figures would not have undergone any significant change. They
reveal an abysmally low level of skill formation. Perhaps, the preference is for a generalist
orientation due to the fact that a government job requires academic qualification rather than
vocational skills. There is some change in this perception in the recent years due to a clamp
down on such recruitments by the government and the PSUs, and opportunities opening for
skilled labour in the “new economy” industries.
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Table 4.2
Rural Urban The percentage
Possessing Male Female Male Female distribution of persons
by possession of skills
No skill 89.9 93.7 80.04 88.8 (1993–1994).
Some Skill 10.1 6.3 19.6 11.2
Total 100.0 100.0 100.0 100.0
Sample persons (183464) (172835) (109067) (99283)
Source: NSSO Report No. 409 on Results of 50th Round (1993–1994) Survey on Employment
and Unemployment
4.3 The Demand for Labour

The current demand for labour is directed towards vocational skills and the need for knowl-
edge workers. This gap in demand and supply of labour may require some structural tweak-
ing during transition, but in the industrial relations context, the larger question may be to
enhance the productivity levels of existing workers and those who are likely to enter the
labour force.
4.3.1 Employment Distribution

The result of the changes discussed in Section 4.2 has brought about distinctive changes in
sectors with employment opportunities. It is now different from the traditional sectors of
industrial employment, namely, organized sector including the government and the PSUs,
manufacturing, etc. These changes are discussed in the subsequent paragraphs, and it is
important for the readers to proactively debate the consequences of these changes on the
scope and coverage of industrial relations.
OR G ANIZED –UNO RG AN I ZE D. The growth of employment in the organized

sector has not kept pace with that in the unorganized sector. A major reason for this could
be the near freeze in employment opportunities in the PSUs and the government. The data
in Table 4.3 is revealing:
Table 4.3
Growth Rate The organized-sector
Sector Employment (in million) (per cent per annum) employment.
Organized Sector 1983 1988 1994 1999–2000 1983–1994 1994–2000
Employment 24.01 25.71 27.18 28.11 1.13 0.56
Public Sector 16.46 18.32 19.30 19.41 1.46 0.10
Private Sector 7.55 7.39 7.88 8.70 0.39 1.64
Note: The organized sector employment figures are as reported in the Employment Market
Information System of Ministry of Labour and pertain to 1 March of 1983, 1988, 1994 and
1999
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72 Part I Context
Employment in the organized sector has virtually stagnated post 1993–1994. More than 90
per cent of employment in 2001 (Census 2001) was in the unorganized sector. Typically, due
to reasons such as dispersal, small and scattered size, lack of opportunity to forge a com-
monality of objectives and limited accessibility to protection of labour laws, the labour in
such employments comprise the unorganized sector or unorganized labour. The implication
of this distribution will largely keep this labour force outside the purview of any industrial
relations system due to the following reasons:
Poor bargaining power
The lack of continuity of employment due to seasonality, and the economic viability
of the unit to continuously employ such persons through ups and downs of a busi-
ness cycle
Outside the coverage of industrial/labour law
The major trends in
the unorganized sector The casual nature of employment and the lack of formal relationship with the
include: employer
Ninety-three per cent Outside the welfare coverage due to discontinuity of employment, number not being
of employees in the
unorganized sector large enough to collectively raise the issue, general apathy of the employer towards
The absence of an welfare
institutionalized IR Non-unionization due to small numbers and also the reluctance of main TUs to
system
stretch themselves and reach these workers; there is not enough “pay-off ” to union-
Labour regulations not
for smaller establish- ization effort
ments Out of reach of the major social-security schemes, since the enforcement of the
Social security being schemes is geared towards larger organized sectors
out of reach
The absence of unions It
I is paradoxical that the section of labour most in need of the protection of labour leg-
does not provide any islation,
i trade unions, labour enforcement machinery, social security schemes draws
opportunity for collec- the
t least. The knee-jerk reaction to this state of affairs may be to immediately bring
tive bargaining
the
t entire population under the above-mentioned protection, but that may kill the
flexibility
f and business viability of the small sector. And finding innovative measures
to find the balance is where the challenge lies for the employers, the employees and
the State and their respective organizations. This sector, in the coming years, is going
to grow, and there is no way but to prepare for tomorrow’s battle with tomorrow’s
weapons, rather than tinkering with outdated weapons. The alternative could be an
adhocracy
a in the industrial relations management with occasional road bumps. An
Profit and market lead- approach
a could be:
ership are the prime
drivers, not social A tripartite consensus on labour and employment flexibility with a viable social-
objectives. security net
Changes in market
and technology are A creative solution to equitable sharing of the social-security burden
throwing up newer The shifting of labour to the organized sector, either through expansion or increasing
competency require-
ments. the coverage of labour legislations and effective enforcement
There are large Some kind of institution to promote union security for increasing the participation of
employment oppor- unions in the hitherto unattended areas; unions must commit to focus their attention
tunities in the private
sector. to areas other than the organized sector
Public-sector employ-
ment faces stagnation
and decline. THE PUBLIC–PRIVATE SECTOR. The public enterprises were set up in India with
T
More opportunities are the
t dual objective of social development and infrastructure development. Till mid-1991, the
there in tertiary sectors. government
g policy was based on socialist principles. As a consequence, employment oppor-
t
tunities in the public sector were far more than those in private sectors. The public sector had
a monopoly of basic and heavy industries, and employed a large number of people. Despite
liberalization, employment in public sectors continues to be greater than the private sector,
M04_SING6013_01_C04.indd 72 6/17/10 1:55:39 AM

but the growth in this sector has shown a decline, while the private sector is opening up large
employment opportunities for the youth.
It needs to be understood that in the competitive environment in which a global
economy functions, profit and market leadership are the prime drivers, not social
objectives that public sectors are associated with. The social objective of private indus-
tries comes by way of the corporate social responsibility that a particular company
may choose to associate with. Competition being the driver, competence of individuals
becomes the criterion for employment. Furthermore, it is not just competence, but a
competence that matches with the competency required for the job, which also under-
goes changes keeping pace with the changing market and technological environment
in the industry.
INDUSTRY-WISE DISTRIBUTION. The distribution of workers by the industry category

has also shown a dramatic rise in the tertiary sector. The shift in working population from
the primary sector, like agriculture, to the secondary sector—manufacturing and allied
industries—to the now-emerging tertiary sector is similar to the trend witnessed by sev-
eral developed economies. This places a greater demand on skills and attitude in addition
to updated knowledge to match the job competencies. The employment potential sectors
have shifted from factories, mines and plantations to finance, commercial, IT and ITES and
community services.
4.3.2 The Impact on Labour Deployment, Utilization

and Productivity
The benefits of economic growth as a result of globalization have, however, been restricted
mainly to the educated and/or skilled urban population. The main beneficiaries of globaliza-
tion in the region have been skilled labour, especially workers in the information/communi-
cation technology sector. That the firms today operate in a fiercely competitive environment
is a clichéd statement but a reality. The response to this competition has to be nimble-footed
changes in structures and strategies, with one of the aims being to reduce competition itself.
This may involve acquisitions, mergers, alliances that give breathing space to the entity facing
competition. However, these measures throw up their own challenges of adjustments. And,
to make these adjustments, organizations need flexibility. The private-sector companies have
adjusted well through labour-deployment strategies to optimize human-capital utilization,
but the public sector needs to think out of the box to be more responsive to change, more so
with regard to the pace of change. The large-scale employment, however, does prove to be a
bottleneck, but a change in strategy oriented towards employee relations can have a catalytic
effect on change.

“There must be a consensus on social partnership (between employers and unions) to avoid chaos
and street riots in the present situation of widespread downsizing of workforce, outsourcing, casualiza-
tion of labour and deindustrialization as a result of economic reform.”
W. R. Varadrajan of CITU, in a CII-sponsored seminar in the year 2001
These were the words spoken by a senior left-union representative almost 10 years after
liberalization. In the light of the happenings since, do you think such statements are exagger-
ated? What was he referring to as “social partnership” and why has it become necessary?
Source: Quoted in R. Gopalakrishnan, “Industrial Relations: Towards Social Partnership,”The

Hindu, 26 July 2001
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74 Part I Context
4.4 The Challenges to IR

The change in industry and business brought on by progressive integration of the Indian
economy to the world economy on the one hand, and the change in demand profi le for
labour and the changing demographics, on the other, throw their own challenges. The
effort to address these challenges may, perhaps, lead to a new paradigm in the manage-
ment of industrial relations in India. The following issues need to be examined for a new
perspective to emerge.
Ways for expanding the coverage of collective bargaining must be found to bring
the large, uncovered population (almost 93 per cent of labour force) in the main system.
Economic and social justice, a prerequisite for industrial peace, can be delivered only
through this process.
Evolving mechanisms and the environment for collective bargaining to yield long-term
agreements for stability amidst fluctuations in the business cycle and the environment are
necessary, more so, since the emerging trend is for bargaining to take place at local/plant
levels, specific to local requirements and in response to local realities.
Genuine democratization of the industrial relations system to give representation to
diverse interests within the labour is imperative. Questionable attempts at democratiza-
tion and strengthening of the democratization, representation and empowerment through
secret ballot must be looked at with a view to arrive at consensus and innovative solutions.
Recognition, single bargaining agent, the right to strike and dispute resolution must all be
looked at with a view at ground realities.
Almost 50 years of existence of the above essential components of industrial rela-
tions system have, at best, been a “band aid” kind of solution to the problem, not a
complete “health-care system”. There has been a fundamental shift in the structure and
processes, and the system now in place appears so inadequate that it has been left to
stagnate where it was. All the protagonists recognize the problem but refuse to take the
bull by the horn.
Modern HRM practices have significantly altered the framework of industrial relations
in certain sectors that have come up post liberalization. Many companies have insisted upon,
and have developed “union-less” organizations. What are the merits of these, and are there
any hidden issues? Surely, these need to be examined dispassionately, for experiments such
as these may provide insights for a future paradigm.
Labour management relations have witnessed regional variations with the advent of
reforms. These may increase over the years with differential industrialization of regions.
Instead of trying to get into the cause-and-effect cycle, perhaps, legislative compliance and
enforcement across regions may be necessary to iron out discrepancies. If this is not done,
then the distortions in investments may accentuate further, bringing with it consequences on
the labour–management relationship front.
The impact on the industrial relations needs to be considered from the perspectives of
(i) the employer (ii) the employees and (iii) the government.
4.4.1 The Employer’s Perspective

There is a perceptible shift with employers veering towards the employee relations approach,
giving adequate emphasis on the softer view of HRM concerned with facilitating optimum
utilization of human resources/capital. They have taken over the union’s role of ensuring
that “hygiene” factors do not act as impediments to performance. Employee involvement,
participation and engagement programmes, which would be discussed in subsequent
chapters, are being introduced to increase commitment and generate organizational com-
mitment. A shift from the creation of employment contracts to psychological contracts is
slowly emerging.
Compensation structures have shifted from seniority/tenure based to pay for
performance/skill/competence. HR strategies of employers aim towards motivating
M04_SING6013_01_C04.indd 74 6/17/10 1:55:40 AM

employees for quality, customer orientation and innovation. The new HRM model is
composed of policies that promote mutuality of goals to elicit commitment. Employer
initiatives provide greater flexibility and multi-skilling, thereby leading to removal
of union demarcation by craft or industry. As we had discussed in Chapter 1 , there
appears to be a distinct shift towards a “unitary” approach or, more appropriately, a
“neo-unitary” approach.
4.4.2 The Employee’s/Union’s Perspective

The new market-driven economy has moved trade unions from the centre to the periph-
ery. HRM strategies focus on motivating manpower for customer delight, which can
come only from enthusiasm and initiative. This requires commitment at each individual
level in the organization. Commitment is a unitarist concept and not the spirit of col-
lectivism that trade unions advocate. Dual commitment to both the employer and the
trade unions is a misnomer and employees understand its consequences in a cost-driven
competitive market.
The union’s response to these changes has been politically motivated and influenced. In
most cases, they have resisted whenever there is a linkage to reduced deployment of man-
power, or the existing skill sets of labour cannot be upgraded for redeployment. It is the
management’s responsibility to create confidence and build up momentum, whenever such
organizational restructuring is attempted, and facilitate learning and training opportuni-
ties for existing employees to adopt the technological changes. It is time that trade unions
strategize their role as internal-change agents for the organization, and thereby contribute to
organizational success.
The union has now been clearly motivated by ensuring clear benefits for workers, more
welfare facilities and single table bargaining. The management needs to be proactive in ensur-
ing their provision and be careful to avoid inequalities in pay.
Unions need to involve themselves in preparing the workers for the new-millennium
competitive skills, and broaden the scope and coverage of content in communication with
management. They need to take on the role of a facilitator, giving friendly counsel and advice
to the workers, and aim at improving the quality of work life.
The unions must confront the reality of competition, technological changes, changes
in industrial structures and processes brought about by competition and a changing work-
force profile. They must acknowledge that to cope with these wholesale changes, organiza-
tions need to be flexible in their responses. “The consumer is the king” is a reality that the
unions must accept from within, and not just pay lip service to it. Unions, perhaps, must
focus more on the vulnerable areas where the workers need to organize, that is, the infor-
mal sector. This may also help them redeem their utility as a potent force for social devel-
opment and reduce their increasing marginalization from the organized sector. Perhaps,
the trade-union organizations, themselves, may undergo structural changes by the merg-
ing of ideologies.
4.4.3 The Government’s Perspective

and the Labour Laws
The existing legislative framework is not conducive to the creation of more opportunities
for absorption of labour into industry. These are purported to be pro-labour, but end up
discouraging the industry to employ more labour due to very restrictive and rigid provisions.
It is generally recognized that the framework served the purpose in an exploitative colonial
regime and, to an extent, in a protective and insulated economy. There is a need for a funda-
mental change today. Perhaps, with a slight tilt in the favour of employment, the structural
problem of gap in supply and demand may be reduced. This issue is glaring at everybody in
the face, but the consensus to do something about it is elusive. The government has to take
the initiative to hammer out a consensus and usher in legislative reforms. It should not be
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76 Part I Context
impossible to find a balance between the incentive for greater intake of labour by the indus-
try and the concern for labour welfare.
It needs to be appreciated that adopting stringent labour laws affects the bottom line,
more so in the Indian context, where legislation is very labour oriented. Restructuring
and changing work and task designs with technological changes impact the employment
of labour in terms of quantity as well as skill requirements, but their impact must be
related to productivity improvements. Wages must be linked to productivity and made
competitive.
The role of the trade union in terms of not just rights but also obligations must be rein-
forced through a code of discipline. A similar code for management should be created to
balance the roles and make both interdependent players in the market, and not create islands
of wealth.
The communication between the employers and the employees needs to be transparent
and direct. This would enable a better appreciation of the cyclical trends in business, and
ensure a greater sense of involvement and participation.
SUMMARY
The changing characteristics of the labour market have i. An endeavour to shift as much of labour force as
placed a greater demand for skilled labour on account of possible from the unorganized to the organized sector.
technological development. This would give workers a better deal in terms of wages.
This is possible only if the rigidities in the labour
There is an emerging problem of maintaining continued
market are relaxed, and wage determination begins to
employability of labour force, especially in community
reflect the resource endowment in the country. This
services, which placed a greater demand on multi-
would encourage establishments to adopt labour-
skilling.
intensive technologies.
With globalization and liberalization, the industrial sector is
ii. Employment creation in small establishments will have
adapting to the competitive market environment by gaining
to be promoted by incentives linked with jobs created,
competitive advantage through technology, automation,
rather than capital invested.
rationalization and costs.
iii. A strategy to raise the wage levels will have to be
It is time for the trade-union organizations to reinvent their
linked with a programme for the development of
strategic objectives and act as facilitators of change.
vocational skills. This requires a timely investment
The role of protecting rights of workers needs to be ensured. in skill development and training at an enhanced
level, the enhancement of education and the skill
The employers, on their part, are moving towards employee
level of the workers, and a responsive training
relations rather than industrial relations, by having a one-to-
system.
one relationship with the employees.
iv. A simple, but broad-based, social-security system
New economic reforms brought changes in legislation
will have to be developed to improve the quality
relating to trade, finance, and industrial policy, but none in
of employment, especially for the informal sector.
labour laws.
Such a social-security system, coupled with better
Many labour laws and judgements stay as impediments to labour incomes, based on better productivity of
our competitive status in the arena of global industry. trained manpower, will facilitate the conversion of
emerging work opportunities into meaningful jobs,
The government needs to take the initiative to facilitate
where chances of extreme exploitation of labour
the process of economic growth by revisiting the
get eliminated. There is a need for an effective
labour legislations in the current context of a global
partnership of all stakeholders.
economy.
The following are important issues that need examination

and debate:
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KEY TERMS
automation 65 globalization 67 rationalization 65
disintermediation 65 participation rate 69 subsistence worker/employment 69
REVIEW QUESTIONS
1 Discuss the changing characteristics of the Indian worker. In 3 What has been the union response to automation and
what way has the opening up of the economy influenced the mechanization in India? Elucidate your answer with
changing workforce profile? examples.
2 How has globalization affected industrial relations in India?

Discuss the possible responses to the changes from the
perspectives of each of the main players of industrial relations.

1 The growing internationalization of business and workforce and fears. Discuss probable employer response and union
has its impact on HRM in terms of problems of unfamiliar response to these changes. Give examples to support your
laws, languages, practices, attitudes, management styles, answer.
work ethics and more. HR managers face a challenge to
3 There are signs of changing demographics of the workforce
deal with more and more heterogeneous sets of workers
reflected in age and qualification mix, dual career couples,
and more involvement in the employee’s personal life.
large chunk of young blood with contrasting ethos of work
Discuss these changes in the light of industrial relations
among old superannuating employees, growing number
management.
of women in workforce, working mothers, more educated
2 Liberalization has led to large-scale reorganization and aware workers, etc. Thus, the changing demography of
of businesses in terms of expansions, mergers and workforce has its own implications for industrial relations.
acquisitions, joint ventures, takeovers, and internal Discuss these implications and the strategies required to
restructuring of organizations. In circumstances as cope with the same.
dynamic and as uncertain as these, it is a challenge to
manage the employees’ anxiety, uncertainties, insecurities
D E B AT E
1 Workforce demographics are changing and it is becoming 2 The forces of globalization will never be able to address the
more diverse in today’s global village. Tapping synergies of a main socio-economic issue of unemployment in India. It is
diverse workforce is crucial for innovations in a competitive inadvisable to open up the economy without a strong social-
environment. This would require a global corporate culture, security system in place.
and standardized policies and procedures. Industrial rela-
tions, therefore, will have no role to play, as unions and State
intervention will become irrelevant.
The Airport Authority Strike Against Privatization run by AAI. The Indian government’s ambitious plan to
privatize the modernization of the country’s two biggest
In February 2006, the employees of the Airport
airports—at Mumbai and Delhi—sparked off another
Authority of India struck work in protest against the
major controversy, leading to strikes, protests, threats,
privatization of the airport. AAEU also protested the
complaints and accusations.
development of Greenfield airports at Hyderabad and
Bangalore, which meant closing down the old airports
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78 Part I Context
Thousands of Airport-Authority-of-India employees went on airport-modernization process. Both bidders had agreed
an “indefinite” strike against the government’s privatization to absorb 60 per cent of the employees. About 10 per
plans, and a bidder who lost out, moved the court, cent of the employees would continue to work for AAI in
challenging the airport bids. these airports, and 7 to 8 per cent were expected to retire
by 2009. The rest would be absorbed by the AAI and
The issues relating to the strike are summarized below:
posted at other airports.
The government awarded the modernization contract for
One of the major political parties supporting the
the Delhi and Mumbai airports—the country’s two busiest
strike said they were not protesting against the
airports—to two private consortia. GMR-Fraport clinched
“modernization” of these airports. They argued that
the modernization bid for the Delhi airport, while GVK-
all the airports in the country, especially the biggest
South African Airports bagged the Mumbai airport.
ones like the Mumbai and Delhi airports, should be
This led to nationwide protests by the employees of the modernized and made world-class. “But in the name
Airport Authority of India. of modernization, what the government has done is to
virtually sell the airport to a consortium of companies.
The unions raised a fundamental question—were the
We are all for modernization of airports; but we are
airports in India so badly maintained that they needed to
dead against their privatization,” said one of the
be modernized?
Central Trade Union leaders.
There are, in fact, 449 airports/airstrips in the
The alternative suggestion from the employees’ unions
country. Among these, the AAI owns and manages 5
was that instead of awarding the contract for modernizing
international airports, 87 domestic airports and 28 civil
the airports to private companies, the government should
enclaves at defence airfields, and provides air-traffic
allow the AAI to build world-class airports. They had been
services over the entire Indian airspace and adjoining
arguing that the AAI is a profit-making company with
oceanic areas. Some 35 million domestic and
reserves and surplus funds of INR 30,000 crore (INR 300
international passengers travel through these airports
billion) and almost zero-debt status, which could meet
every year. But the infrastructure at all the airports
the anticipated expenditure for the development of the
has remained much below international benchmarks.
airports.
This was stated to be the government’s rationale for
modernizing/privatizing the Mumbai and Delhi airports The AAI Employees’ Union had, in fact, submitted an
(to be followed by others). airport-modernization plan to the government. But
the government said their plan was evaluated and it
The government invited technical bids and financial
scored less than 50 per cent in the technical evaluation,
tenders from private companies/consortia to build and
not making the cut even after revisions by the bid
maintain the two airports. The government finally selected
document.
two bidders and awarded the contracts to them.
Questions
The airport employees protested as they feared they
will lose jobs if the government went ahead with the 1. Discuss the above case and bring out the issues from an
modernization and eventual privatization plan. There were industrial relations perspective.
nearly 22,000 employees with the AAI, working across
2. What would have reduced the confrontation with the
all the airports in the country. They feared that the private
unions?
companies that were going to rebuild these airports would
throw them out. 3. Critically examine the stand of the unions.
The government says the charges were baseless. It says 4. How should the “consortia” handle the employee relations
it had taken care of the welfare of the employees in the for a smooth project implementation?
NOTES
1 Adapted from A. B. Manju, “No More Late Hours for HDFC 3 Ministry of Finance, Government of India, “Union
Bank Employees,” Financial Chronicle, 9 June 2009, http:// Budget and Economic Survey”, Economic Survey
www.mydigitalfc.com/companies/no-more-late-hours-hdfc- 2007–2008.
bank-employees-302.
2 Employment (Vision 2020), pp. 1–2, http://planningcommission.

nic.in/reports/genrep/bkpap2020/32_bg2020.pdf.
M04_SING6013_01_C04.indd 78 6/17/10 1:55:40 AM

SUGGESTED READING
Deya, F. C. Beneath the Miracle: Labour Standards in the New India: The Coming Decades (Delhi: Sriram Center for Industrial
Asian Industrialism (Berkley: University of California Press, Relations, 1992).
1989).
Tulpule, B. “New Industrial Policy, Employment and Structural
Government of India, Report of the Working Group of Labour Adjustment in India”, Indian Worker, Mumbai,1993.
Policy, 9th 5 Year Plan (New Delhi: Ministry of Labour, 1996).
Venkatratnam, C. S. (ed.) “Labour Management Relations and
Kuruvila, S. and C. S. Venkatratnam, “Economic Development World in Transition”, in Globalization and Labour Management
and Industrial Relations in South and Southeast Asia: Past Trends Relations (New Delhi: Response Books, 2001).
and Future Developments”, Industrial Relations Journal (UK), Vol.
Venkatratnam, C. S. and Anil Verma, Challenge of Change:
27(1), March 1996.
Industrial Relations in Indian Industy (New Delhi: New Global
Sengupta, A. K. “New Generation of Organized Workforce in Press, 1997).
India: Implications for Management and Trade Unions”, in J.
S. Sodhi and S. P. S. Ahluwalia (eds.), Industrial Relations in
M04_SING6013_01_C04.indd 79 6/17/10 1:55:40 AM

chapter five
5.1 The Concept of Trade Unionism After reading this chapter, you will be able to:
5.2 Politics and Trade Unions • Describe the concept of trade unionism
5.3 Rights of Trade Unions • Identify the factors that led to the origin and
5.4 Roles, Functions and Objectives of Trade the growth of trade unions
Unions • Define the principles underlying trade
5.5 Features of an Effective Trade Union unionism
5.6 The Classification of Trade Unions • Understand the various approaches to the
5.7 Strategies for the Achievement of Trade study of trade unions
Union Objectives • Understand the structure, functions and
5.8 The State of Trade Unions in the World activities of trade unions
Tata’s Takeover of Jaguar and Land Rover1
The takeover of Jaguar and Land Rover, emblems of the British auto, by Tata Motors in March 2008 was greeted with
approval but regret by Unite, Britain’s largest trade union formed by the merger of Amicus and the Transport and General
Workers’ Union on 1 May 2007.
Unite, though not happy about the impending ownership change, in early July 2007, sent a five-point charter to Ford
demanding, among other things, that the union be involved in the sale process. The union members were present in the
early stages of presentations and negotiations between Ford and the bidders. Despite the lack of unanimity among the
rank and file of Unite, the union’s preference helped Tata Motors to emerge the front-runner, leaving the other bidders
behind.
In November 2007, Unite issued a public statement saying that, of all the bidders, Tata Motors, with an established presence
and background in manufacturing, was its preferred buyer for Jaguar and Land Rover. Tata Motors, realizing how critical
it was going to be for them to take Unite along for both the acquisition and post-acquisition support, during the various
stages of discussion and negotiation with Ford, reiterated through various channels that the jobs of the workers at Jaguar
and Land Rover would remain secure and post-takeover, the 160,000-odd jobs across the various Ford sites in Britain would
continue untouched.
In January 2008, about three months prior to the actual closing of the deal, Tony Woodley, General Joint Secretary, Unite,
said in a press release that detailed meetings focusing on the job security of the workers in Jaguar, Land Rover and other
Ford plants in the UK were necessary. Other crucial issues around wages, terms and conditions and pension also needed to
be addressed before the final decision could be taken.
In March 2008, the takeover was formalized, but only after Tata Motors issued an undertaking that jobs would be saved.
Tata Motors also committed to long-term supply agreements for components from Ford units in the UK.
M05_SING6013_01_C05.indd 80 6/17/10 1:56:28 AM

Trade Unionism
and Trade Unions
“. . . . .I do believe that the trade union movement has played a very important role in our national develop-
ment. Trade unions are an integral part of the functioning of our social democracy. I seek their cooperation in
taking our nation forward. I do urge our trade union leadership to recognize that in a world where demand
and technology are undergoing rapid change and firms must adjust or perish, we need reasonable flexibility in
markets and in public policy and our public policy must respond to such needs with speed. I do sincerely believe
that such an approach will be in the best interests of promoting the growth of employment opportunities. . . . . .”
Prime Minister’s Address to the 40th Indian Labour Conference (New Delhi: 9 December, 2005)
Trade unions have come a long way since the middle of the eighteenth century to the present
when they influence business decisions and even national policy. Taking the unions into confi-
dence is one of the strategic necessities when companies pursue their strategies for growth. Just
like Tata Motors, Hindalco, an Aditya Birla Group Company, also made an elaborate presenta-
tion to the trade unions of a Canadian Aluminium plant that it acquired in 2007. On-boarding
of unions is now a part of the due diligence process before mergers and acquisitions. Alongside,
companies also adopt a host of other corporate strategic moves. The journey of the trade unions
up to this stage, as an important stakeholder in business, has been an eventful one as we learn in
the following sections.
5.1 The Concept of Trade Unionism

Trade unions are an important institution in the realm of industrial relations. A trade union is
an organization of workers or employees that is formed mainly to negotiate with the employ-
ers on various employment-related issues. This is a simplistic definition of a trade union; just
to introduce the term, trade unions play a major role in representing interests of its members
(employees) and in regulating labour-market relations with the employers. “Trade unionism”,
developed as an effort of the labour to organize during the Industrial Revolution era, promoted
the Factory System of production and a laissez-faire approach of the State towards participants
of the Factory System.
Put simply, the initial days of industrialization resulted in a kind of work organization where the
employers, in their effort to extract maximum from the resources at hand (including labour), devel-
oped an exploitative regime as far as labour was concerned. An individual worker was powerless in
the face of the employer and could do little for amelioration of his conditions of work. A collective
might not be as powerless. Besides, an individual worker may be dispensable for an employer, a col-
lective may not be. The genesis of modern trade unionism lies here. At the fundamental level, union-
ism binds the workers together into a common action, with “strike” as their ultimate weapon. This
collectivism was aimed at restoring some kind of a balance in the employer–employee relationship.
Trade unionism refers to that movement from the labour that has progressively sought to protect
jobs and real earnings, secure better conditions of work and life, and fight against exploitation and
M05_SING6013_01_C05.indd 81 6/17/10 1:56:30 AM

82 Part I Context

“Globalization is too important a phenomenon to be left as unmanaged as today. The need is for
stronger governance to preserve the advantages of global markets and competition to ensure that
globalization works for the people, and not just for profits . . .”
INTUC in 21st Century
Do you think unions will have any role to play in meaningful governance of
globalization?
Strike
a
arbitrariness to ensure fairness and equity in employment. In short, trade unionism had ini-
ttially grown in order to:
“Strike” refers to a col-
lective refusal to work by Respond to a clear demarcation between capital and labour
the workers with a view
to bring pressure on the Laissez-faire policy of the State in matters relating to labour and capital
management to accede
to a demand. This is the Provide bargaining power to the workers
meaning in its simplest But
B the journey of trade unions and trade unionism has been full of challenges.
form, although an elabo-
rate definition has been
given in the Industrial
Disputes Act, 1947.
5.1.1 Characteristics of Trade Unionism
5
The institution of trade unions has evolved over a few centuries and has undergone changes
over the years. They (TUs) vary individually in their structure, types and activities, yet they
o
also demonstrate certain similarities as organizations and institutions. Many trade unions
have a long history. It may be necessary to understand the history of these trade unions to
appreciate their responses to contemporary issues facing them. It may appear paradoxical
that to tackle contemporary issues, many of the trade unions take recourse to early actions
taken by early leaders and members.
One of the earliest definitions of “trade unions” was given by Sidney and Beatrice Webb,
Trade Union aand it is still valid in essential parts: “TU is a continuous association of wage earners for the
It is an organization of purpose of maintaining or improving the conditions of their working lives.”2 This classical
p
workers or employees that ddefinition of trade union remains valid in as much as it is a person’s work as an employee
is formed mainly to nego-
tthat determines his or her potential eligibility for membership. However, it needs to be rec-
tiate with the employers
on various employment- oognized that trade unionism is not something that either exists or does not exist at a given
related issues. ppoint of time and space. It can exist along a continuum of varying strength. Union density
iis one of the measures of the strength of unionization. There are qualitative measures, too,
wwhich indicate the strength of unionization; for example, the extent of commitment to the
principles and ideologies of trade unionism (whether the body declares itself to be a trade
union, whether it is independent of employers for the purpose of negotiations, whether it
recognizes bargaining as one of its major functions, and so on).
In a nutshell, the concept of trade unionism emerges from the need for a constant
organization or a permanent association that is engaged in securing economic benefits for
employees while protecting their interests.
5.1.2 The Origin of Trade Unionism

Industrialization brought about a new social order in societies. The distinction between capi-
talists and labour created a class distinction. The capitalist economic order is based upon
the notion that the pursuit of self-interest by every individual leads to the establishment of
an economic and social order that serves best the interests of all concerned. The capitalist
economic system is an order that is supposed to accommodate all-pervading, conflicting
interests. The trade union emerged as a result of the industrialization in the new social order,
as a power-equating institution. That means the trade union checks the power of the manage-
ment over individual workers.
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Trade Unionism and Trade Unions 83
The philosophy of economic liberalism and laissez-faire prevented the State from com-
ing to the rescue of the exploited class of labour. The aggrievement of labour in a capitalist
society stimulated the formation of unions and associations, which took up the cause of the
working class. As an individual, the worker had no bargaining power and could easily be
replaced. The collective power of association, therefore, provided cover, as collectively dis-
pensing with a group of workers was a far more difficult proposition. The common problems
and sentiments of the working class became the catalyst for organizing themselves into asso-
ciations to meet and counter the employers.
5.1.3 The Impact of Trade Unions

Trade unionism owes its influence to industrialization and capitalism. Trade unionism from
its inception has been assertive in fighting for the rights of workers and securing higher
wages and benefits. In industrially advanced countries, trade unionism has also made a great
impact on the social, political and economic life.
Trade unions have also, sometimes, led the movement for ameliorating the conditions of the
weaker sections of the society. They have worked towards improving especially the working con-
ditions for women and children, and abolishing child labour. In addition, they have constantly
spearheaded the movements for general economic betterment of the working class, humane
working hours, safety and other welfare measures pertaining to labour and dependants.
5.1.4 Principles of Trade Unionism

There are a few fundamental principles on which trade unionism hinges, the prominent ones
being:
1. Unity: Unity is strength.
2. Equality: Workers must not be discriminated against on the basis of caste, creed or
sex. In regard to pay, each worker must get equal pay for equal work.
3. Security: The security of the employment of their members must be safeguarded.
5.1.5 Theories for the Emergence of Trade Unionism

A few important theories that have attempted to describe the emergence of trade unionism
are discussed in the following sections.
REVO LUT IO NARY T HEO R Y. Credited to Marx and Engels and included in
Basic Theories of Trade
Manifesto of the Communist Party, this theory propounds that the means of production must Unionism
belong to the workers3. Trade unions are instruments for a revolution in which the capitalists
must be destroyed and the workers (proletariat) must take over the industry and, in turn, the Revolutionary-
ownership based
government. Trade unions were a means towards the achievement of a classless society. With
Industrial-democracy-
this approach, trade unions were regarded as a component in the larger political process for rights based
the establishment of a classless society. The events in the USSR and the erstwhile communist Business-economic
states proved disastrous to the movement of communism and their ideas of revolution. power
Socio-psychological-
IND UST RIAL D EM O CRAC Y. Largely credited to Sidney and Beatrice Webb, this belongingness
approach compares democracy in the government wherein “State power” is prevented from
inflicting injury to individual citizens by means of elected representatives and people’s power.
Similarly, through unions, the workers protect themselves from the power and influence of
the owners, as the individual workers are no match for the owners in these aspects. Unions
are organizations where industrial democracy is established so that exploitation of any kind
by the owners on the workers is prevented. All sets of rules and regulations are developed
including industrial jurisprudence, which protect workers just as the public law protects citi-
zens from the arbitrariness of the State.
M05_SING6013_01_C05.indd 83 6/17/10 1:56:31 AM

84 Part I Context
BUS I NE SS T H E O R Y. Here, the economic power of the workers’ association—the

union—is emphasized. Samuel Gompers, the advocate for this line of reasoning, emphasized
that the primary objective of the union is to protect the economic interest of the workers.
SO CI O -P SYCH O LO G I CAL T H E O R Y. According to this theory, the workers

make use of the union to meet their socio-psychological needs—physiological, security, com-
panionship, ego, etc.
5.1.6 Reasons for Joining a Trade Union

It becomes increasingly important for us to examine the reasons for joining a trade union as
we observe the shift from industrial relations to employee relations with a redundant role of
trade unions. The workers join a union for the following reasons:
To attain economic security
To be able to improve bargaining power
For the ventilation of worker grievances
For an information medium
To protect unexpected economic needs
To satisfy social needs
For securing power
These needs are relevant even today in an era of “hire and fire”, downsizing and redesigning
of jobs. But the management takes on the role of negotiating individually with the worker on
issues, concerns and aspirations of the workers. This makes the medium of the worker redun-
dant. The trade unions can still play an important role by facilitating the economic transition
by making workers adapt to the changes through training and personal upgradation of skills
to suit the dynamics of the environment. Their success would add to their credibility with the
management, which can provide the much-needed bargaining power for collective agree-
ments to be drawn out concerning workers’ interests.
5.1.7 Tools of Trade Unionism

Trade unions mostly use four methods for furthering their objectives:
Mutual Insurance: In exchange for the fees that the members pay to the union, the
Tools of Trade Unionism
union renders certain services, which are more functional in nature.
Mutual insurance
Collective bargaining Collective Bargaining: Unions attain most of their requirements through collective
Legal enactment bargaining.
Direct action Legal Enactment: Unions mainly advocate on changing and introducing legislation
favourable to labour through legal enactment.
Direct Action: Resorting to strikes and agitations to pressurize employers is an exam-
ple of direct action.
Unions change their methods over periods of time and rarely use any one method even at a
single point of time. The method used depends on the issues involved and the circumstances.
The “direct action” method could be any of the following:
Strike is the most common method, which is the collective withdrawal of work by the
members of a union acting in concert. The strike may take place in an entire industry, or be
confined to a single enterprise or even department. It may also be called by one or several
unions jointly. Variations of the strike include “sit-in” or “work-in” strikes or “tool-down”
or “pen-down” strikes. The sit-in strike is not only a work stoppage but also a refusal by
M05_SING6013_01_C05.indd 84 6/17/10 1:56:31 AM

strikers to vacate the premises. A work-in strike is one where the workers do not stop work
Wildcat Strike
but continue the production in defiance of management, who may have stopped production
or declared a closure. It is, thus, the opposite of a usual strike—not a withdrawal of work but This type of strike is
conducted usually by a
continuation of work to defy management. This type of strike was evolved by workers to pro- small section of workers
test closures of different plants during recessionary periods, and was particularly common in who may defy even their
the ship-building yards of Britain in the late 1960s and early 1970s. own union leaders and
Other methods of withdrawal of work include mass casual leave, “pen down”, etc. The could be in response to
problem with these types of agitation is that management may not know exactly how to deal a small shop-floor issue
or an argument between
with them. While there may be clear legislative guidelines for handling a strike, there are a manager and a single
often no clear ways of dealing with strikers who take mass casual leave, or where it may be employee.
difficult to prove that the strikers have acted in concert.
Direct action also includes the “wildcat strike” or “walk-out”, which is usually by a
small section of workers who may be defying even their own union leaders, and could be
in response to a small shop-floor issue, or an argument between a manager and a single Picketing
employee. These are usually of short duration. The action taken by
Some types of action taken by unions function as accessories to the main action or strike. unionists to prevent willing
employees from attend-
These are picketing and boycott. Picketing is the action taken by unionists to prevent employees ing work after a strike has
from attending work after a strike has been called. This activity is usually carried out at the gate been called “picketing”.
or entrance, but may also be done at any other location near or far from the factory or a section This activity is usually
of it. Picketing is a legitimate activity in some countries, although not specifically allowed in carried out at the gate or
India. Generally, by convention, peaceful picketing is allowed, but once picketers turn violent entrance, but may also be
done at any other loca-
or use force on the workers who want to work, it becomes banned. Boycott means the rejection tion near or far from the
by workers of specific activities, products or services provided by management. It may include factory or a section of it.
pay boycott in case of unsatisfactory pay, food boycott in case of poor canteen facilities, and the
boycott of goods supplied by a company. A secondary boycott includes the boycott of related
items. This could mean the boycott of rail services during an airlines strike. Hunger strike is an
activity where employees carry their protest by putting moral pressure on management. Direct Action
The methods by which unions partially withdraw work or reduce output are “work-to- Strike, tool-down, wild-cat
rule”, and “go-slow”. Under these methods also, the unions may not officially stop work, but strike, go-slow, sit-in,
work only at a slower pace or specifically refuse to do certain tasks, which have the effect of pen-down, walk-out,
work-to- rule, work-in,
reducing the total output, or disrupting the work process. mass leave, picketing,
Some coercive methods are used by unions or employees to make their displeasure or boycott, gherao, dem-
protest known to management, with the objective of getting unfavourable decisions reversed onstration, postering,
or modified. These include mass insubordination (the concerted refusal or defiance of man- refusal, hunger-strike
agement orders), demonstration, gherao (the confinement of managerial personnel within a
small space till a more favourable decision is given, which may continue for even 48 hours),
postering, and blockade. Blockade may not involve any stoppage of passage at a certain point
or of certain goods. They do not, however, disturb the production process. The problem with
these methods is that the management often does not know how to deal with these methods
Work-to-Rule and
of strike. They may not know whether pay can be cut or disciplinary action taken.
Go-Slow
Under these methods,
unions may not officially
5.2 Politics and Trade Unions stop work but work only
at a slower pace or
For decades, every problem of the labour movement, especially in India, has been attributed to specifically refuse to do
a single cause—the political links of trade unions. This has been the case in several developing certain tasks, which have
societies, although its peculiarity is distinctive to some former British colonies such as India and the effect of reducing the
total output, or disrupting
Sri Lanka. British unions that were created have sustained the Labour Party, and in this sense, the work process.
they are as political as Indian unions. Marxists consider politicization essential. Marx criticizes
the preoccupation of some unions with local and immediate struggles, and the resultant aloof-
ness from general and political movements. The Marxian view on the role of trade unions has
been commented upon by Dr Jerome Joseph. “Workers form unions to struggle against capitalist
employers. However, trade unions have to transcend these limited aims. The capitalist system
has created this capitalist class and the working class. Workers’ organizations have to organize
the working class not only to maintain and enhance the wage levels, but also to carry out a class
M05_SING6013_01_C05.indd 85 6/17/10 1:56:32 AM

86 Part I Context
sstruggle against the capitalist class.”4 An attempt to obtain shorter working hours in a single
Link Between Politics
and Trade Unions
company
c by putting pressure on an individual employer may be a purely economic function
of
o a union, but as soon as the same union acts on a national level or joins forces with others to
There is a link between
politics and unionism.
obtain
o legislation to reduce working hours, it becomes a political movement. But politics seeks
The politically commit-
the
t advantages of linking with labour unions as a facilitator to capture mass vote banks of labour
ted members account in
i industry-based constituencies. Even in the USA, the links between the AFL-CIO and the
for 15–20 per cent of Democratic
D Party are quite close, as becomes apparent during the time of election.
total membership in a It is generally recognized that unions use industrial and political action, and the latter
union, but their influ- implies
i political connection. The unions in the developing countries of Asia, Africa and Latin
ence is high.
America
A are not alone in maintaining close links with political parties. There is an intimate
Political parties and
unions function in close
link
l between a union and a party in every country in Europe. The politically committed
cooperation, but there members
m do not constitute a numerical majority, not even a large minority. They account for
is an essential differ- about
a 15–20 per cent of the total membership in every union. But their influence in the union
ence between the two. is
i vastly superior to what their size would suggest. Research students have often ignored this
The TUs in India are question
q on the assumption that workers cannot be interested in politics.
fragmented due to While parties and unions function in close cooperation, there is an essential difference and
their allegiance to dif-
ferent political parties.
even
e opposition between the two. The fundamental purpose of a party is to govern, while that of
a union is to protest. All parties hope to wield the reins of power and run a government. In con-
trast,
t a union is an instrument of protest, not a government, neither an industry nor a nation.
5.3 Rights of Trade Unions

The International Labour Organization (ILO) recognized the right of association through the
Freedom of Association and Protection of the Right to Organize Convention (Convention
No. 87)5. Excerpts from the Convention are given in Box 5.2.
In 1987, the ILO then representing 97 member countries, 145 trade-union centres and 85
million workers, at its 73rd Conference, reiterated that many of the participating governments
BOX 5.2 FREEDOM OF ASSOCIATION: EXTRACTS FROM THE CONVENTION

87 OF ILO
Article 2
Workers and employers, without distinction whatsoever, shall have the right to establish
and, subject only to the rules of the organization concerned, to join organizations of their
own choosing without previous authorization.
Article 3
1. Workers’ and employers’ organizations shall have the right to draw up their constitu-
tions and rules, to elect their representatives in full freedom, to organize their admin-
istration and activities and to formulate their programmes.
2. The public authorities shall refrain from any interference, which would restrict this right
or impede the lawful exercise thereof.
Article 4
Workers’ and employers’ organizations shall not be liable to be dissolved or suspended
by administrative authority.
Article 5
Workers’ and employers’ organizations shall have the right to establish and join federa-
tions and confederations and any such organization, federation or confederation shall
have the right to affiliate with international organizations of workers and employers.
Article 6
The provisions of Articles 2, 3 and 4 hereof apply to federations and confederations of
workers’ and employers’ organizations.
M05_SING6013_01_C05.indd 86 6/17/10 1:56:32 AM

had not ratified this Convention. This warning was the result of a survey that the ILO had been
conducting on member countries from 1983, and the violators mentioned were:
Pakistan, where legislation restricted unionization in civil services, export processing
zones, some public enterprises, schools, hospitals, and public transport
Bangladesh, where authorities had extensive powers to supervise internal affairs of
unions and could ban bargaining in public enterprises
Indonesia, where the law required government permission before strikes and which
was never given
South Korea, where law restricted the right to associate itself
Canada, where restrictions had been imposed on bargaining in public services in
three provinces
United Kingdom, where legislation seriously restricted the internal autonomy of
unions and unionization in the communications centre at Cheltenham from 1984
East Europe, USSR, Czechoslovakia, Poland, etc., where previous restrictions had not
been removed
This report was even more candid about the repression on unionists. In 1986 alone, 200 union
activists had been murdered, of which 190 were in Brazil. Of the 4,500 imprisonments in
that year, 3,400 were from South Africa alone. This also indicates that union activism is
inextricably linked with politics, even if we do not want to acknowledge it or would prefer
to exclude it.
5.4 Roles, Functions and Objectives

of Trade Unions
The role of trade unions is interpreted differently by different stake holders. The most widely
recognized role of trade unions is that of a protector. Their primary effort throughout their
existence has been in ameliorating the working conditions, protecting and enhancing wages
and earnings, protecting employment and fighting discrimination, unfairness and exploi-
tation of workers. However, with time, other roles of trade unions have also emerged and
gained prominence although the primary role remains the raison d’etre of the TUs. By and
large, in their protective role, the TUs have been instrumental in forging out collective agree-
ments. The legislative regimes in various countries have also affected and have been affected
by the trade-union roles and efforts. For example, in many countries, wage levels are largely
determined by the government, whereas in others, it is left to market forces and collective
bargaining. Different legislative regimes in different countries modify the role of the trade
unions to that extent.
In short, the role of a trade union is to protect and promote and regulate the relations
between workers and employers, or between workers and workers through collective bar-
gaining. They play an important role in moulding the industrial relations.
5.4.1 Objectives of Trade Unions

The following are the broad objectives of trade unions:
1. Ensure Security of Workers: This involves continued employment of workers, pre-
venting retrenchment, layoffs or lockouts; restricting the application of “fire” or “dis-
missal or discharge”, etc.
2. Obtain Better Economic Returns: This involves wage hike at periodic intervals,
bonus at higher rates, other admissible allowances, subsidized canteen and trans-
port facilities, etc.
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88 Part I Context
3. Improve Working Environment and Welfare Measures: This involves better

The major objectives of
trade unions are the fol- workplaces, ventilation, lighting, safety, healthcare, sanitation, less pollution, wel-
lowing: fare measures for working ladies, maternity facilities, children’s education, housing,
insurance, social-security schemes, old-age covers, etc.
Ensure security of
workers 4. Secure Power to Influence Management: This involves the worker’s participation
Obtain better eco- in management, decision-making, the role of unions in policy decisions affecting
nomic returns workers, etc.
Improve working con-
ditions 5. Secure Power to Influence the Government: This involves influence on the govern-
Power to influence ment to pass labour legislation that improves working conditions; safety, welfare,
management security and retirement benefits of the workers and their dependents; curbing the
Power to influence the power of punishment by employers; seeking redress of grievances, etc.
government
5.4.2 Functions of Trade Unions

5
According to Punekar, the most basic function of trade unions is to build up its own organi-
zation and to give weight to its collective actions. Once this is accomplished, other functions
follow—economic (or the attainment of the financial interests of workers) as well as political,
legal and welfare functions. The social function is not what is meant by social purpose usu-
ally. The social purpose may be the object of a changing society. But there is a paradox in it.
The social purpose of yesterday, once accomplished, becomes the social function of today.
For example, the social purpose after the Great Depression was to establish the position of
the trade unions in the industry on a firmer foundation, in terms of union security and rec-
ognition. After the Depression was over and the economy had recovered, that social purpose
did not remain, but the unions continued to discharge social functions of obtaining recogni-
tion. In recent years, the social purpose of unions appears to be to help the industry achieve
higher levels of productivity.
Broadly speaking, the functions of a modern trade union are very comprehensive, much
Broadly speaking, the
functions of trade unions more so than those of their counterparts in the past; it has, moreover, a clearer perception
m
are: of its ultimate aims and objectives. Its functions are generally classified into those that are
o
militant or protective, and those that are fraternal, ministrant or positive. Under the former
m
Organizational
ggroup of functions, a trade union is primarily concerned with obtaining better conditions
Economic
of work and of employment for its members through such militant activities as strikes and
o
Political-legal
boycotts, which are generally resorted to when efforts at collective bargaining fail to bear
b
Welfare
rresults. The latter functions relate to the provision of such benefits as sickness and accident
payments. A trade union also offers financial support to its members during strikes and lock-
p
outs and during periods of temporary unemployment.
P ROT E CT E C O NO M I C I NT E R E ST S. Arguably, the economic function of a

trade union is the most significant one. A trade union, once organized, revolves around the
economic demand of its members, which manifest themselves in the following forms:
Improved economic status
Shorter working day
Improvement in working and living conditions
Better health and safety standards
Upgrading welfare facilities
Promoting internal and external equity
S O C I A L . The power of management within an enterprise can be kept in check through

strong unionism. In addition, unions affect nearly every other measurable aspect of the
operation of workplace and the enterprises, from top line to the enhancement of productivity
M05_SING6013_01_C05.indd 88 6/17/10 1:56:33 AM

to the compensation structure. The absence of strong unionization in the unorganized sec-
tor is reflected in the behaviour of workers and firms, which differ substantially from the
organized sector. On the balance, unionization appears to improve rather than to harm the
social and economic system. It is with this belief that the First Five Year Plan encouraged
trade unions to:
i) Present plans to workers so as to create enthusiasm in implementing them
ii) Exercise utmost restraint in regard to work stoppage
iii) Formulate wage demands that are attuned to the requirements of economic devel-
opment and are in keeping with considerations of social justice
iv) Assume greater responsibility for the success of productive effort
POL ICY AND L EGISL AT I VE . Initially, unions were successful in correcting

arbitrary conditions of work and service, often through legislation. They made their presence
felt in the area of personnel policy within undertakings by including recruitment, transfer
and promotion in collective bargaining. But today, there may be very little left to fight for. For
instance, many organizations under business compulsions have ceased to exploit their work-
force and offer not only good wages but ample welfare and comfortable working conditions.
To a great extent, these have rendered trade unions superfluous. In developed countries,
unions devote more time to issues other than wages and working conditions. Even in devel-
oping countries, unions in large, well-established firms have few of the traditional conflicts
with management. In today’s context, however, the questions of employment and the work
process itself occupy more time and energy of the unions. In most countries, unions find
themselves increasingly concerned with economic policies at the national level.
RED RESS INEQ UAL IT Y. If we get back to the basics of unionism, we see that there
is unequal distribution of money and power in all organizations. The job of any union is to Functions of Trade
redress this inequality; that is, to make the distribution of money and power less unequal Unions:
than it is. They may negotiate with management the terms and conditions under which their Protect economic inter-
members are employed. This may bring pressure to bear on the government to enact legisla- ests of the members
tion for the same. Influence social
relationships at the
workplace
PR ECIP ITAT E CO L L ECT IV E WI T H D R AWAL I N T H E P UR SUI T O F Influence policies at
SECT IO NAL INT EREST. But their most important weapons and one that unions the national level
have fiercely clung on to throughout history is the collective withdrawal of labour, otherwise Collective action for
called the strike. Through union organization, workers bring pressure to bear on enterprise sectional interest
management and the ruling elite. Collaboration for
productivity and gain-
sharing
PR O D UCT IV IT Y. Also, the establishment of union–industry conferences have facili-
Enhancing profes-
tated the collaboration between unions and management, which has been necessitated by the sional status
fact that power, wherever it lies, cannot be dissociated from responsibility, in the long run. Research
And this collaboration serves the purpose of industry as well as labour. Communication, wel-
fare and education
E NHANCE P RO F ESSIO N AL STAT US. Unions have also assumed a role of
enhancing professional competence of their members through providing expert knowledge,
raising the standard of competency in their occupation, improving the professional equip-
ment of their members, educating them and endeavouring by every means to increase their
status in public estimation. Enlarging opportunities for promotion and training is a function
that has the most congruence with the business objectives of an enterprise.
PR EPARAT IO N F O R BAR G AI NI NG. Monappa adds research functions to

trade-union activities.6 Research on wages, working conditions, effects of work on their
members’ health and safety or even on the management performance in an enterprise (which
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90 Part I Context
Philips’ workers did in Bombay once) would be an inevitable part of the activities of any
efficient union.
To summarize then, unions perform numerous functions to preserve, protect and
advance the interests of their members, and to maintain the association itself.
ANCI LLAR Y
Communication: Many large unions bring out newsletters clarifying the union’s policy or
stand on certain principal issues. It is also used as a channel of communication on the man-
agement activities as well as union activities.
Welfare Activities: They include self-employment opportunities for women or spouse of
workers, education facilities for worker children, organizing medical camps, sports activities,
etc. Some unions also set up housing and cooperative societies.
Education: This involves organizing adult literacy classes, promoting the government’s
worker-education schemes and information-driven seminars on aspects concerning their
rights and responsibilities.
In India, the trade unions have been focusing on the following functions:
Achieving higher wages and living standards/working conditions by entering into
agreements through negotiations/collective bargaining
Acquiring the control of industry by workers, especially in major public services and
utilities such as railways, air traffic and transport
Resisting job insecurities, helplessness and victimization, which was clearly evident
during the Airport Authority strike in 2005
Grievance identification and devising a procedure for its redress
Raising the status of workers as an important constituent of economic growth and
development
Enhancing morale and self-confidence and thereby enlarging opportunities for
growth
Educational, cultural and recreational facilities in townships or at the workplace
Promoting the identity of interests of workers with their industry
Ancillary-communication, welfare, education, etc.; basically organizing and guiding
workers
Intervening to promote worker interests during the formulation of HR policies
At the national level, serve as an agency for industrial democracy advocating workers’
rights and protecting against arbitrary and unfair treatment of their jobs
5.4.3 Activities of Trade Unions

The functions discussed in Section 5.4.2 can be broken down into the following activities:
ECO NO M I C . Exercising pressure for protecting and promoting economic interests

of workers, such as:
i) Improved economic status
ii) Shorter working day
iii) Improvement in working and living conditions
iv) Better health and safety standards
v) Upgrading welfare facilities
vi) Reducing inequalities—both internally within the organization and outside
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POL IT ICAL
i) Seeking/obtaining political power through political affiliations
ii) Lobbying activities to influence the cause of labour and legislations for the same
iii) Participating in, and representing the workers on bipartite forums
iv) Developing revolutionary ideologies among the workers
v) Protesting against governmental decisions that may be detrimental to the interest of
workers; bandhs called by political parties)
SO CIAL
i) Initiating and developing workers’ education scheme
ii) Organizing welfare and recreational activities such as mutual insurance
iii) Providing monetary and other help during periods of strikes and economic
distress
iv) Running cooperative welfare schemes and societies
v) Facilitating housing needs
vi) Community-development work
vii) Organizing cultural functions
viii) Associating with the government’s social-welfare programmes
N AT IO NAL / INT ERNAT IO NAL LE VE L

i) Representing workers at the national level on advisory committees
ii) Associating with national federations for the purpose of building working-class
unity and solidarity
iii) Raising funds in case of national/international calamities or tragedies
5.5 Features of an Effective Trade Union

Trade unions are basically a consequence of democratic institutions and, hence, must be The features of an effec-
tive trade union are:
formed through an elected consensus. This implies that trade unions must be internally dem-
ocratic with a strong leadership that safeguards worker interests and their need to participate Internally democratic
in the management’s decision-making process. External leadership or leaders with political Have a strong leader-
aspirations would provide the referral support of the State to bargain, but this dependency ship
would create far more insecurities than consolidation of gains. The democratic nature would Exhibit a responsibility
towards their worker
be through regularity in participation in meetings and actively contributing to workers’ members
interests. Committed to promote
Trade unionism has a responsibility to national growth and development. Working industrial peace and
on collective needs of the workers should not delineate them from the macro-perspective harmony
of achieving productivity gains for the economy. This implies that trade unions have a Inclined towards col-
responsibility towards their worker members and also the State to promote industrial peace lective bargaining that
and harmony essential for growth. Collective bargaining should be collaborative, and not is collaborative and
not competitive.
competitive.
Possess financial secu-
Financial security should be ensured by the initiation of activities that can raise funds rity
and put the union on a strong foundation. The union should operate with honesty and integ- Adaptable to change
rity of purpose with clearly defined objectives, coherent and well-conceived policies and
organizational methods.
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92 Part I Context
Trade unions should accept change as a part of the growth cycle and view all types of
changes, be it technological, structural, systemic or cultural in a macro-perspective, while
also preparing workers to adapt to the changes required. In fact, a trade union is effective
and also desirable by the management if it acts as an internal-change agent that stimulates
competitive advantage gains on all fronts.
5.6 The Classification of Trade Unions

The classification of trade unions emerges from the interests of the workers. Thus, over a period
of time, the union structure has evolved through various interests, sometimes, protective, some-
times regulatory, and at times revolutionary, in the given socio-political environment. They
can either be classified by their purpose, which could be protective and regulatory, reformist
or revolutionary. They may also be categorized on the basis of how they are organized, which
could be on the basis of some trade, skill or craft (e.g. Welder’s Union or Diploma Engineers
Union); as a mix across different skills or trades, more on the lines of a general union; or an
attempt to organize all workers within a particular industry resulting in industrial unionism.
These may further have local branches and unite centrally with a national federation. Table 5.1
gives a simple structure for classification on the basis of purpose or membership.
BY P UR P O SE
(a) Regulatory Unions: They protect workers’ rights, fight against victimization and
exploitation. They function on the ideology of economic and social justice, and reg-
ulate any decision or policy that violates the “rights” of workers.
(b) Reformist Unions: They aim at preservation of the capitalist economic structure
through the maintenance of employer–employee relationship. They do not seek to
change the existing social, economic or political structure of the State or the busi-
ness strategy of the industrial unit. A further subdivision of this classification could
be (a) business unionism, where employees enter into successful business relation-
ships with employers or (b) friendly or uplift unions, where they aspire to elevate the
moral, intellectual and social life of the workers.
(c) Revolutionary Unions: They aim at destroying the present structure and replacing
it with a new order that is regarded as preferable to the working class. They could be
anarchist or political in nature. A variant of this is called “predatory union”, which
does not subscribe to any revolutionary ideology but ruthlessly pursues an expedi-
ent objective.
Craft Union
Craft union is a trade BY M E M BE R SH I P
B
union that comprises
workers who are engaged (d) Craft Unions: These unions are formed by the membership only of those employed
in a particular craft or in a particular craft or trade or related trades/craft. The earliest unions were generally
skill but who are not all craft unions, with members from just one craft or trade, such as weavers or engine
working for the same drivers. The craft unions proved to be stable unions by virtue of their collective craft or
employer; e.g. Welder’s
specialization power. The skill level of the members was usually at par and the union
Union, Cabin Crew
Association. operated purely for the sectional interests of their craft. Membership is restricted to
persons belonging to a particular skill level in a particular trade. The union may operate
Table 5.1
Basis of Classification Types
The classification of
unions. Purpose Regulatory, Reformist, Reactionary
Membership Craft, Staff, Industrial, General
M05_SING6013_01_C05.indd 92 6/17/10 1:56:35 AM

in a single enterprise or in a particular industry and may be small or large. A modern

equivalent is the pilots’ guild, which has been able to bring air-traffic movement to a
standstill on many occasions. The members of this union are conscious of their rights
as key-category professionals and their strategic role to the business objectives.
(e) Staff Union: These include all workers or staff of the unit/enterprise, the special-
ized or craftsmen included. Their organization is based on common concerns, needs
or aspirations and derives strength from their solidarity. Being multidisciplinary in
composition, the issues of concern are wide ranging and keep changing with the
changing dynamics of the industrial society. Participation is greater as membership
is greater and power is derived from the strength of membership.
(f) Industrial Union: This is similar to the staff union except that it extends beyond
one unit or enterprise and is collectively concerned with the industry as a whole. Industrial Union
It, therefore, focuses on the industry-specific concerns. Examples include Textile This is a trade union that
Labour Association of Ahmedabad, and Rashtriya Mazdoor Sangh, Bombay. combines all workers,
both skilled and unskilled,
Craft unions provide stable leadership, training and have strong bargaining power; who are employed in a
whereas industrial trade unions have joint, collective bargaining power and can ensure uni- particular industry.
formity in service conditions and coordinate sectional claims. Too many craft unions would
help the employer play one union against another.
(g) General Unions: These unions cover various industries and workers/labour of dif-
ferent types and skills. The issues are generic and their source of strength is the
membership and solidarity among them for a purpose.
5.6.1 The Evolution of the Trade Union Structure

As industry became more complex and the differentiation within the workforce grew, the
craft union began to federate, or join with other craft unions to form larger pressure groups
in order to gain more power. This forced them to shed many of their exclusive demands pecu-
liar only to one craft or trade and push more general issues, which would satisfy most or all
of their members. The more common issues had to be pressed first. In certain cases, sectional
interests were contrary to general interests of workers and had to be abandoned. This led ulti-
mately to the general or industrial union, the commonest form today in large industry. The
membership of a general or industrial union is open to any worker or employee either in an
enterprise or in an industry operating also at either level. Usually, the size of general unions
is larger than that of craft unions.
The location of a union may thereafter determine the level of its operation or functioning.
For instance, we refer to plant or enterprise-level unions, which operate at the factory level,
industry-level unions, which operate at the industry level comprising several or many facto-
ries or enterprises. In addition, we also refer to federations, which are combinations of two or
more plant-level unions operating either at the company level or at the industry level.
There are also central union bodies or apex organizations, which function as the mouth-
piece of the labour movement, in general. In the USA, the AFL-CIO, and in the UK, the
Trade union Congress (TUC) serve this purpose. In India, there are also central unions or
forums, which are not registered under the Trade Unions Act, but which act as the apex bod-
ies of politically oriented unions. Thus, all types of unions owing allegiance to one political
party are affiliated to the central forum of that party and are easily identifiable in India and in
other countries like Germany or France where political links are close.
5.6.2 Determinants of the Growth of Trade Unions

Moving on from the evolution of trade unions and what makes them effective and attracts
workers to become members, one can identify the factors that affect the growth of trade
unions as given in Box 5.3.
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94 Part I Context
BOX 5.3 THE FACTORS DETERMINING THE GROWTH OF TRADE UNIONS

The growth of group attitude based on common concerns, interest and aspirations
Separate distinction based on class—workers and management or labour and
management—that precludes certain rights and facilities to the workers
Dissatisfaction with the current economic and welfare benefits
The realization of the strength of collectivism against the individual’s insecurity and
dispensability on the job
The degree of industrial commitment of workforce—the less mobile the worker, the
greater would be the forces driving for unionization
The composition of workforce—the greater the number of skilled/key category
workers, the greater would be the unionization
The introduction of labour-displacing technology has an inherent potential for
unionization on account of the fear of losing jobs
Leadership can be a driving force drawing workers to join a particular union.
The attitude of employers towards unions—the more restrictive, lower the growth
but greater the intensity of resistance put forth by the existing union
Political and legal framework—the political affiliations with the political party
in power provide an impetus to the growth of such unions. The legal sanctity
accorded to trade unions also furthers the pace of growth.
Public opinion with regard to trade unions is dependent on the political and social
ideology prevailing at a point of time. If the opinion views trade unions to be
counter-productive, it can retard the pace of growth of trade unionism.
5.7 Strategies for the Achievement

of Trade Union Objectives
Trade unions use a combination of strategies for achieving their objectives. A few basic ones
are listed below, although these are not exhaustive:
i) Organizing on the basis of craft or skill and using the union’s power of collective
indispensability to bargain
ii) Getting recognized as the sole bargaining agent to advocate the interest of the mem-
bers. The recognition could be voluntary, coming from the management or gained
through secret ballot elections.
iii) Associating with national federations to get political support to their cause
iv) Collective bargaining of terms and conditions of employment, thereby entailing
concerted action on the part of the employees and employers on the basis of a com-
mon agreement
v) Union security achieved through closed shop or union shop or an agency-shop
arrangement
(vi) Channelizing the procedures that involve the processing and handling of
grievances
vii) Negotiating agreements with the management on wages, hours of work and other
terms and conditions of employment
viii) Arbitration by which unsettled or unresolved disputes can be settled by an outside
agency
ix) Political pressure through local legislations or political affiliations
M05_SING6013_01_C05.indd 94 6/17/10 1:56:35 AM

x) Mutual insurance through common contributions to meet financial needs of work-

ers; the method of mutual insurance focuses only on welfare benefits provided by
trade unions to its members for improving their conditions. It may involve the cre-
ation of a common fund to which every member contributes. This induces workers
to join the union, improves their financial position and also helps in maintaining
discipline among the members.
xi) Legal enactments—trade unions send their representatives to legislatures so that
protective labour legislations may be enacted to secure better working and living
conditions for workers.
The trade unions, at the present juncture, are undergoing a transition and groping for an
approach that would be relevant to this reality. Everyone agrees that labour-market flexibility
in some form is inevitable under the current forces, but there is no consensus on how this
flexibility is to be achieved. Trade unions find this transition threatening since it would have
a social cost, which will question the very purpose of their existence. There is no easy answer
for them under the present framework except to approach it as a shared problem amongst the
affected players and their needs.
5.8 The State of Trade Unions in the World

The general perception about the trade unions today is negative, mainly owing to the
functioning rather than the results that they are able to achieve. Th e underlying prin-
ciples for the existence of trade unions are generally acceptable, but the chequered history
sometimes puts a question mark on their methods and morality. This, however, is true of
any public institution to some extent, so it would be unfair to single out the TUs for such
perception. Closed Shop
There has been a decline in union membership across the world. Closed Shop employs
Union structures and dynamics, to a large extent, are shaped by the socio-political-legal only people who are
framework of a country and, therefore, the structure and dynamics are not uniform all over already union members,
and in this case, the
the world. They vary, depending upon the legal framework that obtains in that country. employer must recruit
We will learn about “union security” in Chapter 6. Different laws about “closed shop” directly from the union.
in different countries affect the manner in which a trade union goes about its business. In
Table 5.2
Country Structure Functions
Trade unions in different
USA A single main national Protecting wages of workers against capitalist countries: A comparison.
centre, the American exploitation
Federation of Labour and Increasing wages
Congress of Industrial Reducing hours of work
Organization (AFL-CIO), Securing just and human working conditions
made up of a relatively Improving the sanitary and safety conditions at
large number (currently 64) workplace
of industrial and occupa- Increasing workers’ share in national income
tional unions Introducing working rules
Democratizing labour management
Achieving equal opportunity
Safeguarding the labour movement from commu-
nists, fascists
Encouraging the sale of union-made goods
through the use of union label
Participating in various community activities
(Continued)
M05_SING6013_01_C05.indd 95 6/17/10 1:56:36 AM

Table 5.2 (cont.)
Trade unions in different
Country Structure Functions
countries: A comparison. Former State socialist trade unions Raising labour productivity
USSR acting as a “transmission Improving the quality of production
belt” between the party and Participation in planning
the masses. Regulation of wages
Assisting in techno-structural changes
The organizational structure
Collective agreements on wages and working
of the trade unions mirrored
conditions
that of the party-State, the
Participation in settlement of disputes
majority of their functions
Concluding agreements on the utilization of funds
were party-State functions
allotted for social and industrial security
and their authority derived
from the party-State. Striving for better organization of medical assis-
tance and the protection of the health of women
and children
Developing artistic mass activity

Promoting culture and sports
Helping attract women into public, productive and
social life
Drafting, issuing, implementation and the supervi-
sion of labour legislation
Maintenance of labour discipline
Provision of housing and other welfare amenities
UK Tradition of voluntarism; the Maintaining and improving wages, hours and

representation of workers conditions of work
through trade-union officers Providing and improving opportunities for
at workplaces in the form of the advancement of workers to obtain “full
shop stewards; organization employment”
of trade-union membership Extending the influence of the working class on
is on occupational rather policy issues
than industrial lines Extending social control on the nation’s economic
life
Avoiding inequalities between different sectors
China Mass organization of the Organizing workers to launch labour-emulation

working class led by the drives, strengthening labour discipline and ensur-
party, and are the transmis- ing fulfilment of plans
sion belts between the party Improving material and cultural standards of the
and the masses workers’ lives and supervising the managements
with a view to implement various targets
Organizing political, educational and technical
studies as well as cultural and sports activities
Ensuring equal pay for equal work
Guaranteeing material assistance to the workers in
old age/illness
Providing recreational activities
Protecting women and children from exploitation
Working for the improvement of living conditions
Entering into collective agreements with manage-
ment on wages, labour norms, welfare and social
security
M05_SING6013_01_C05.indd 96 6/21/10 4:08:21 PM

Germany, for example, closed shops are illegal, that is, there can be no discrimination on the
basis of membership to a particular union. Germany also encourages greater participation
and decision-making than in other industrialized countries. Margaret Thatcher introduced a
series of changes in the UK in the 1980s, which gave freedom to employees to either join or
not join a union. A union’s functioning also depends, to an extent, on the degree to which it
shares the ideology with political parties. In many countries, unions and political parties are
close and even share leadership. The Labour Party in the UK is a case in point. CITU is a part
of the CPI(M) and almost all the central TU organizations in India are closely aligned with a
political party.
Some differentiating variables of the unions in different countries have been covered in
Chapter 3. The summary table in Table 5.2 below gives a snapshot of the differences.
SUMMARY
Unions are organizations designed to promote and enhance Security: The security of employment of their members must
the social and economic welfare of their members. be safeguarded.
The unions emerged to protect worker interests, and, Trade unions have the following main objectives:
gradually, started playing an important role in the social and
Ensure the security of workers
political affairs of a country.
Obtain better economic returns
Trade unions are part of the fabric of industrial democracy
and can play a constructive role in improving production Improve working conditions
and productivity, and the resolution of conflicts.
Power to influence management
Trade unionism had initially grown in order to:
Power to influence the government
Respond to a clear demarcation between capital and Broad functions of TUs can be clubbed under the following
labour heads:
Laissez-faire policy of the State in matters relating to Organizational
labour and capital
Economic
Provide bargaining power to the workers
Political-Legal
Trade unionism is not something that either exists or does
not exist at a given point of time and space. It can exist along Welfare
a continuum of varying strength. The union classification can be done on the basis of their
There are a few fundamental principles on which trade interests, sometimes, protective, sometimes regulatory,
unionism hinges, the prominent ones being: and at times revolutionary, in the given socio-political
environment.
Unity: Unity is strength.
They can either be classified by their purpose, which could
Equality: Workers must not be discriminated against on the be protective and regulatory, reformist or revolutionary.
basis of caste, creed or sex. In regard to pay, each worker They may also be categorized on the basis of how they are
must get equal pay for equal work. organized, which could be on the basis of some trade or skill.
KEY TERMS
craft union 92 “sit-in” strike 84 wildcat strike or walk-out 85
closed shop 94 strike 82 work-to-rule and go-slow 85
industrial union 93 trade unions 82
picketing 85 union shop 94
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98 Part I Context
REVIEW QUESTIONS
1 What are the characteristics of trade unions? ii. characteristics of trade unionism
2 What is a trade union and how are they generally formed? iii. classification of trade unions
Trace the genesis of trade unions.
iv. strategies for the achievement of objectives of a trade
3 Explain the following: union
i. the objectives of a trade union

1 What are the functions of trade unions? Examine whether present environment, the trade unions need to reinvent
the trade unions in India have been able to fulfil these themselves?
functions.
3 Discuss the changing role of trade unions and the resultant
2 In the current-day competitive environment, has the impact of union–management relations consequent to
role of trade unions changed? Do you think, in the globalization and technological breakthroughs in industry.
D E B AT E
1 The days of trade unions are over. With an increase in the 2 Trade unions cannot be effective unless they back their
knowledge workers and knowledge economy, the conditions actions with militancy or industrial action.
that prevailed in the Factory System are no longer present.
The Value of Unions to UK Businesses can make in the workplace. In these tough times, Britain’s
businesses need as much support as possible. Union reps can
A joint statement setting out the positive contribution that
be a vital resource not only for unions and their members, but
modern union representatives can make to the workplace has
also for the companies and organizations that employ them.
been launched by the Department for Business, the TUC and
the CBI. “The business benefits of a union presence at work add further
weight to the case for union equality reps and union green reps
Featuring real-life examples where well-known companies have
being given new legal rights to paid time off to do their duties
worked with union representatives to bring about changes
and to undertake training related to their union work.
that have been in the best interests of the employer and the
workforce, the case studies show that union representatives can “At the moment, union equality reps and green reps—unlike
be a major resource in the workplace. shop stewards, learning and safety reps—often have to carry
out union work in their own time, and as a result, are not
Reps in Action shows how modern union representatives
nearly as effective as they could be, if they had paid time
and company managers have worked together to deal with
off to carry out their union duties. That’s why the TUC is
situations that can occur in any workplace and as a result
campaigning hard for statutory rights for these reps.”
have, for example, improved working practices, enhanced
workplace training provision or lead to greener workplaces. (Source: Trade Unions Congress, UK - http://www.tuc.org.uk/
organizationorganization/tuc-16456-f0.cfm)
According to research conducted by BERR in 2007, union reps
are worth between £3.4bn and £10.2bn to the UK economy, If there is such complete cooperation between management
on the basis that their presence in a workplace brings about a and trade unions, don’t you think the very purpose of
combination of productivity gains, reduced staff turnover, less forming a trade union is defeated?
time off as a result of sickness, improved health and safety and
Do you think the union has a role in contributing to what are
better training for staff.
regarded as totally management functions, e.g., increasing
TUC General Secretary Brendan Barber said: “This joint productivity, reducing absenteeism and improving workplace
publication reveals the positive contribution that union reps safety?
M05_SING6013_01_C05.indd 98 6/17/10 1:56:37 AM

NOTES
1 “Tata Closes in on Jaguar Takeover”, BBC News, 3 January 3 Manifesto of the Communist Party available online at www.
2008 http://news.bbc.co.uk/2/hi/business/7169681.stm. marxists.org/archive/marx/workers/1848/communist-
“British Union Regrets Ford’s Jaguar Exit, Welcomes manifesto/index.htm.
Tata Takeover”, 26 March 2008, http://economictimes.
4 Jerome Joseph, Industrial Relations: Towards a
indiatimes.com/articleshow/2902057.cms. Bill Koening
Transformational Process Model, (Delhi: Global Business
and Gopal Ratnam, “Tata in Talks to Buy Ford’s Jaguar,
Press, 1995) 7.
Land Rover Units”, 3 January 2008, http://www.bloomberg.
com/apps/news?pid=20601087&sid=aBdsVtn_7HuU&r 5 International Labour Organization, “Freedom of Association
efer=home. Nandini Sen Gupta and Sudeshna Sen, “Tata and Protection of the Right to Organize Convention, 1948”,
Group Emerges Front-runner for Jaguar Land Rover”, The Convention No. 87, http://www.ilo.org/ilolex/cgi-lex/convde.
Economic Times, 23 November 2007, http://economictimes. pl?C087.
indiatimes.com/India_Inc_in_top_gear_Tata_takes_lead/
6 Arun Monappa, Industrial Relations (New Delhi: Tata
articleshow/2563247.cms.
McGraw-Hill, 1985), pp. 56.
2 Sidney and Beatrice Webb, The History of Trade Unionism
(New York: Augustus Kelley, 1965), p 1.
SUGGESTED READING
Beaumont, Phil Change in Industrial Relations (London: Monappa, Arun Industrial Relations (New Delhi: Tata McGraw-
Routledge, 1990). Hill, 1985).
Deodhar, S. B., S. D. Punekar and Saraswathi Sankaran, Labour Waddington, Jeremy and Paul Edwards (eds.), Trade Union
Welfare Trade Unionism and Industrial Relations, Fifteenth Organization in Industrial Relations—Theory and Practice
edition, (New Delhi: Himalaya Publishing House, 2003). (Oxford: Blackwell Publishing, 1995).
Gaur, G. L. Trade Unionism and Industrial Relations (New Delhi:

Deep and Deep Publications, 1986).
M05_SING6013_01_C05.indd 99 6/17/10 1:56:37 AM

chapter six
6.1 Phases of the Growth of Trade Unions After reading this chapter, you will be able to:
in India • Trace the evolution of the trade-union
6.2 The Structure of Trade Unions in India movement in India
6.3 Union Security • Understand the structure and political
6.4 Political Affiliations of Trade Unions affiliations of the major trade unions
6.5 The Problems of Trade Unions in India • Understand the problems of Indian trade
6.6 The Recognition of Unions unions
6.7 Rights of Recognized Unions • Know the provisions of the Trade Unions
6.8 Unfair Labour Practices with Regard Act,1926
to Trade Unions
6.9 Trade Unionism in India Today
6.10 The Trade Unions Act, 1926
6.11 Managerial Trade Unionism
A Show of Strength
The Dwarkapur Steel Plant, established in the year 1956 with technical collaboration from the UK, employed around 20,000
workers and 1,200 managers. Set up at a time when the foundation of the country was being laid through the creation of
infrastructure, the plant managed to attain its rated capacity of 1 million tonne per annum by the early 1960s. Most workers
in the plant were members of the union that was affiliated to the ruling party—the Indian National Congress. The govern-
ment at the centre as well as in the State were from the same party. In the late 1960s, and early 1970s, changes in the politi-
cal landscape saw the rise of the left parties in the State. The rising influence of these left parties encouraged the unions
affiliated to these parties to make their presence felt in the Dwarkapur Steel Plant. To show that it was a force to reckon
with, the newly created union encouraged protests including work stoppages, gheraos and demonstrations, wherever it had
pockets of influence. The management, however, continued dealing with the Congress-affiliated trade union, as it was the
“recognized” union and, as far as records went, the union with a “majority”. The left-affiliated union, in a bid to demon-
strate its hold over the workers in the plant, challenged the management to verify the union membership of all the workers
to ascertain which union had a majority. The management was in a fix, since sensing a threat to its status, the Congress-
affiliated union was opposing the move for verification, threatening industrial action if the management even formally
held discussions with the other union that was not recognized in the first place. In the mean time, a change in the ruling
party at the State level increasingly pressurized the management to undertake the verification process. Both the unions, to
establish their strength, started competing with each other completely vitiating the industrial relations atmosphere in the
plant. Dwarkapur Steel Plant was a central PSU, with the Ministry of Steel, Government of India being the administrative
ministry. On the other hand, the appropriate government under various labour laws was the state government. This further
complicated the issues.
M06_SING6013_01_C06.indd 100 6/18/10 11:41:03 AM

Trade Unions in India
“Our trade-union movement today is fragmented. Everyone talks of the value of unity, the imperative need of
unity today, but in practice, hardly anyone seems to be willing to give up separate identities.”
National Commission on Labour
The opening case highlights one phase of the development of the trade-union movement in
India. Although today, the influence of trade unions seems to have waned to a large extent,
it may be because they are in the process of evaluating a coherent response to the forces
unleashed by liberalization, privatization and globalization. To reach this stage, trade unions
have travelled a long distance—both chronologically and conceptually. This chapter traces the
genesis of the trade-union movement in India, and examines the issues and challenges that
face them in present times.
The trade-union movement in India is over a century old and the trade unions in this country
are generally regarded as too fragmented. Since at least the middle of the twentieth century, trade
unions have split on ideological, political, craft, caste and even on personality bases. These splits have
often resulted in bitter rivalry, and in a few cases, many unions at a workplace have competed for the
allegiance of the same set of workers.
6.1 Phases in the Growth of Trade

Unions in India
The growth of trade unions in India has passed through a few distinctive phases, paralleling the
political and economic developments in the country.
6.1.1 The Pre-independence Phase

India being an agricultural country, trade unionism was largely restricted to industrial areas. The
earliest known trade unions in India were the Bombay Millhand’s Association formed in 1890,
the Amalgamated Society of Railway Servants of India and Burma formed in 1897, the Printers’
Union formed in Calcutta (now Kolkata) in 1905, the Bombay Postal Union which was formed
in 1907, the Kamgar Hitwardhak Sabha, Bombay formed in 1910. The trade-union movement
began in India after the end of the First World War. After a decade following the end of the First
World War, the pressing need for the coordination of activities of the individual unions was rec-
ognized. Thus, the All India Trade Union Congress was formed in 1920 on a national basis; the
Central Labour Board, Bombay and the Bengal Trades Union Federation were formed in 1922.
The All India Railwaymen’s Federation was formed in the same year, and this was followed by the
creation of both provincial and central federations of the unions of post-and-telegraph employ-
ees. The origin of the passing of a Trade Unions Act in India was the historic Buckingham Mill
case of 1940 in which the Madras High Court granted an interim injunction against the Strike
Committee of the Madras Labour Union forbidding them to induce certain workers to break
their contracts of employment by refusing to return to work. The trade-union leaders found
M06_SING6013_01_C06.indd 101 6/18/10 11:41:05 AM

102 Part I Context
t
that they were liable to prosecution and imprisonment for bona fide union activities and
Some interesting facts
about trade unions in iit was felt that some legislation for the protection of the trade union was necessary. In
India: March 1921, Shri N. M. Joshi, then General Secretary, All India Trade Union Congress,
M
ssuccessfully moved a resolution in the Central Legislative Assembly, recommending that
The trade-union move-
ment in India is over a tthe government should introduce legislation for the registration and protection of trade
century old. unions. The opposition from the employers to the adoption of such a measure was, how-
u
Indian trade unions eever, so great that it was not until 1926 that the Indian Trade Unions Act was passed.
are very fragmented. The Indian Trade Unions Bill, 1925 was introduced in the Central Legislative Assembly
T
Early splits in Indian tto provide for the registration of trade unions, and in certain respects, to define the law
trade unions tended rrelating to registered trade unions in provinces of India.
to be on ideological
A trade union in India is the primary instrument for promoting the trade-union
grounds.
movement and championing the cause of the working class in India. The Indian govern-
m
Recent fragmenta-
tions have centred ment passed the Trade Unions Act in 1926, which legalized the registered trade unions
m
on personalities and, iin India. The Act also gives protection to these trade unions against certain civil and
occasionally, on ccriminal cases. There are at present many trade unions in India, which regulate the aspi-
regional and caste rrations of the working classes. The All India Trade Union Congress (AITUC) is the old-
considerations.
eest trade union in India, and till 1945, it remained the central trade-union organization
Trade-union activities
iin India. The trade unions in India could be grouped under two main categories, i.e., the
are restricted to indus-
trial areas. politically affiliated unions and the independent ones. The affiliated unions (those hav-
p
The AITUC was iing links with one or the other political parties) have federated themselves industry-wise
formed in 1920 on a aas also geographically. There are almost 70,000 registered trade unions in India and the
national basis. BMS is the most representative national union.
B
The Trade Union Act The evolution of trade unionism, post-Independence, is described below, in terms of
was passed in 1926. tthe “four phases of unionism” corresponding to the structural changes in the economy that
iimpacted the labour market and industrial relations scenario.
6.1.2 The First Post-independence Phase

The first decade (1950–mid-1960s) corresponds to an era of State planning and import
substitution, when public-sector employment and public-sector unionism rose phenom-
enally. Unions and bargaining structures were highly centralized; the two main federations
The first post-indepen- were
w the nationalist Indian National Trade Union Congress (INTUC) and the communist
dence phase of the All
A India Trade Union Congress (AITUC). State interventionz in the determination of
growth of trade unions wages
w and working conditions was the norm, and “state-dominated pluralism” prevailed.
was characterized by: There was a spurt in union membership and also an increase in labour fragmentation with
An era of State new
n political parties/break-away groups emerging in the fore front of national politics.
planning and import The Hind Mazdoor Sabha (HMS), launched in 1948, emerged stronger with its focus on
substitution the
t nationalization of key industries, securing effective recognition to bargain collectively,
The rise in public- workers’
w participation for the regulation of industries and advocating the cooperative
sector employment movement.
m
and public-sector
unionism
Centralized union
structures and bar- 6.1.3 The Second Post-independence Phase
6
gaining (Mid-1960s–1980)
INTUC and AITUC
main federations The two-decade period (1960s–1980) was a period of economic stagnation and political
State intervention in tturmoil. Many more unions emerged in various parts of India, based on local political
wage determination ssupport. Indian politics also became more heterogeneous with dissident groups emerging.
and working condi- Employment slowed down, there were massive inter-union rivalries, and industrial conflict
E
tions iincreased. Centralized bargaining institutions now started feeling the pressure of dissent
State-dominated ffrom below, and both the Hind Mazdoor Sabha (HMS) and the Centre of Indian Trade
pluralism
Unions (CITU) made significant progress in the labour movement. The crisis culminated
U
A spurt in union mem-
bership and labour in i the May 1974 railway strike that was followed by the 1975–1977 Emergency Regime
fragmentation of o Mrs Gandhi. An “involuted” pluralism dominated Indian labour relations during this
second
s phase.
M06_SING6013_01_C06.indd 102 6/18/10 11:41:05 AM

Trade Unions in India 103
6.1.4 The Third Post-independence Phase The 1960s to the 1980s

(1980–Pre-liberalization Era) represented the second
post-Independence
The third phase (1980–1991) corresponds to a period of segmented and uneven economic growth phase of trade
development. Decentralized bargaining and independent trade unionism enter the stage in unions, characterised by:
a significant way. Two major strikes (the 1980–1981 Bangalore public-sector strike and the A period of economic
1982 Mumbai textile workers’ strike) marked this phase, and inter-state and inter-regional stagnation and politi-
variations in the nature of labour–management regimes became much wider. In the more cal turmoil
profitable economic sectors, the unions gained, but in the unorganized and declining sector, The emergence of
workers lost out and the unions were left with few strategies. many more unions
Heterogeneity of politics
Employment slow down
6.1.5 The Fourth Post-independence Phase Inter-union rivalry
An increase in indus-
(Post-liberalization Era) trial conflicts
Finally, the fourth phase of unionism represents the post-economic reform period. The stabi- Pressure on centralized
lization and structural-adjustment programmes led to demands for increased labour-market bargaining
flexibility, especially employment flexibility. This has led to a recruitment freeze in many The railway strike of
1974 and severe curbs
public-sector sites, and the unions in these sectors now have to cope with competition at the during Emergency
local level. In non-viable public enterprises, unions are coming to terms with “voluntary”
retirement schemes. In the early years of economic reform, there were sincere attempts by all
parties to engage in tripartite consultations, but there now seem to be several barriers to this The pre-liberalization era
form of engagement. from 1980 to 1991 rep-
resented the third major
phase in the growth of
trade unions:
6.2 The Structure of Trade Unions in India Period of segmented
In India, in general, the structure of trade unions consists of three levels: the plant/shop or and uneven economic
growth
local level, the state and the centre. The ideology at the central level percolates to the state and
Decentralized bargain-
plant/unit level. Every national federation of labour in India has state branches, state coming and independent
mittees or state councils, from where its organization works down to the local level. There are trade unionism
two types of organizations to which the trade unions in India are affiliated: Bangalore PSU strike
and Mumbai textile
i) National federations workers’ strike
ii) The federation of unions Inter-state and inter-
regional variations in
National federations have all trade unions, irrespective of the industry, as their affiliated labour–management
members. Such federations are the apex of trade-union structure and coordinate activities relations
of all trade unions to give trade-union policies a national character. All central unions dis-
cussed in Section 6.1.2 are national federations based on different political ideologies and
The liberalization of the
have different positions on labour-related issues. The characteristic features of these national economy in 1991 posed
federations are: new challenges for the
growth of trade unions
Trade-union leadership provided by politicians further:
Political leanings determine whether to follow policy of cooperation/militancy/ Post–economic reform
continuous strife/litigation based on the party’s affiliation to the ruling party period
Stabilization and struc-
Empowered to decide jurisdiction of local and state councils tural adjustments
Allow unit/state-level bargaining with employers Demands for labour-
market flexibility
Nominate delegates to represent in the ILO/International Confederation of Free Recruitment freeze in
Trade Unions’ conferences public sector
Right sizing of man-
The Federation of Unions is a combination of various unions for the purpose of gaining power through VRS
strength and solidarity. Such federations may be local, regional, state, national or even inter- Reducing the role of
national. Examples of local federations of unions include Bharatiya Kamgar Sena; Labour unions
Progressive Federation, Chennai; The National Front of Indian Trade Unions; and the
M06_SING6013_01_C06.indd 103 6/18/10 11:41:06 AM

104 Part I Context
Coordinating Committee of Free Trade Unions. Most of these unions are affiliated to the
central unions.
The National Commission on Labour in India (1969) points out, “The growth of industry-
cum-centre has been facilitated by the provisions in the industrial relations legislation in cer-
tain states permitting recognition of industry-wise unions in a given area. The setting up of
institutions like wage boards and tripartite industrial committees have provided greater scope
for formal and informal consultations in the formulation and implementation of policy at the
all-India level.”1 Stating that the unions in India are not distinctive by craft or category and in
view of the advantages enjoyed by industry unions, the NCL has recommended that:
i) The unions operating in a unit/industry should be encouraged to amalgamate into
an industrial union.
ii) Where an industrial union covering all categories of workers in an enterprise has
been recognized as the sole bargaining agent, it would be desirable for such a union
to set up committees for important craft/occupations so that the problems peculiar
to them receive adequate attention.
6.3 Union Security

Union security is gained through membership that is sought by providing benefits only to
those who remain their members. The union derives its meaning and strength from the num-
ber of members it has. The unions, therefore, look for measures that enhance security, i.e.,
maintaining a healthy membership in comparison to others. These measures may include:
Recognition as the sole bargaining agent, whereby the union is accepted as a bargaining
agent for all employees in the unit, irrespective of whether they are members or not
Maintenance of membership
䊊 Preferential Union Shop: wherein additional recognition by agreement is accorded
by management to give the first chance to union members in recruitment
䊊 Union Shop: employs non-union workers as well, but sets a time limit within
which new employees must join the union
䊊 Closed Shop: employs only people who are already union members, and in this
case, the employer must recruit directly from the union
䊊 Open Shop: does not discriminate based on union membership in employing or
keeping workers. Where a union is active, the open shop allows those workers to be
employed who do not contribute to a union or the collective bargaining process
䊊 Agency Shop: requires non-union workers to pay a fee to the union for its services
in negotiating their contract
Check-off, where an employer deducts union dues directly from pay and hands over
the same to the union as a lump sum.
The National Commission on Labour (1969) in India, while discussing the advantages and
disadvantages of union security measures, made the following recommendations:
i) A closed shop is neither practicable nor desirable. A union shop may be feasible,
although some compulsion is in-built in the system also.
ii) Neither should be introduced by the State. The union security measure should be
allowed to evolve as a natural process of trade-union growth.
iii) An enabling provision to permit check-off on demand by a recognized union would
be adequate.
In fact, most countries are unfavourably inclined towards closed shops or union shops.
M06_SING6013_01_C06.indd 104 6/18/10 11:41:07 AM

6.4 Political Affiliations of Trade Unions

At present, there are nine central unions, all affiliated to a major political party. The major
and important ones are discussed below (see Table 6.1):
1. AITUC (All India Trade Union Congress) was established in 1920 as an outcome of
the resolution passed by the organized workers of Bombay, and its first President
was Lala Lajpat Rai. The AITUC endeavours to achieve its objectives through
legitimate, peaceful and democratic methods such as legislation, education, pro-
paganda, demonstrations, and only as a last resort, opts for strikes or other meth-
ods of protest. The AITUC is affiliated with the World Federation of Trade Unions
(WFTU).
2. INTUC (Indian National Trade Union Congress) was established in 1947 as an
outcome of the resolution by Central Board of the Hindustan Mazdoor Sevak
Sangh, a labour organization working under the direction of the National-
Congress-minded labour leaders on the Gandhian philosophy of Sarvodaya. S. C.
Banerjee was the first President of INTUC. The INTUC stands for the gradual
transformation of the existing social order and it attempts to instil a sense of
responsibility in the workers. INTUC is associated with the ILO since 1949 and
is one of the founding members of the International Confederation of Free Trade
Union Congress (ICFTU).
3. UTUC (United Trade Congress) was formed in 1949 with the aim of establishing
a “pure” trade union, free from the control of political parties. The leadership was
dominated by various left-wing political groups.
4. HMS (Hind Mazdoor Sabha) came into being in 1948 and espouses the socialist
philosophy, having linkages with socialist parties. However, there has been a divi-
sion within the socialist ranks with the emergence of the Hind Mazdoor Panchayat,
another federation with socialist leanings.
5. BMS (Bharatiya Mazdoor Sabha) was the outcome of a decision taken by the Jana
Sangh in its convention in 1954 and is viewed as a productivity-oriented, non-polit-
ical trade union based on a triple ideology—(i) nationalize labour (ii) labourize the
industry and (iii) industrialize the nation.
6. CITU was established in 1971 as a result of the split in the AITUC, which was a
sequel to the split in the CPI, a new centre, owing to its allegiance to the CPI (M).
Table 6.1
Structure Objectives
The structure and stated
AITUC i) Affiliated unions (unit/ i) Establish a socialist state and the objectives of the major
trade unions in India.
plant) nationalization of the means of production,
ii) Provincial bodies distribution and exchanges as far as possible
(state level) ii) Improve economic and social conditions of
iii) General council— the working class, by securing better terms
Central and conditions of employment
iii) Safeguard and promote the workers’ right to
free speech, freedom of association/assembly
and the right to strike
INTUC i) Affiliated unions (unit/ i) Establish an order of society free from

plant) hindrances to an all-round development of its
individual members, which fosters the growth
ii) Industrial federation
of human personality in all its aspects
(Continued)
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106 Part I Context
Table 6.1 (cont.)

objectives of the major iii) Regional branches/ ii) Place industry under national ownership and
trade unions in India. councils control in a suitable form
iv) Assembly of delegates iii) Secure increasing association of workers
v) General council— in the administration of industry and full
working committee participation in that control
iv) Organize society in such a manner as
to ensure full employment and their full
participation in that control
v) Promote social, civic and political interest of
the working class
vi) Establish just industrial relations
vii) Secure redress of grievances without stoppage
of work first by conciliation and thereafter
arbitration and adjudication
viii) Make necessary arrangement for the
efficient control and satisfactory and speedy
conclusion of unauthorized strikes or
satyagraha
ix) Foster the spirit of solidarity, service,
brotherhood, cooperation and mutual help
x) Develop a sense of responsibility among the
workers
xi) Raise the standard of efficiency and discipline
HMS i) Affiliated organization i) Promote the economic, political and social
ii) General council interest of the workers and to improve their
ii) Working of general terms and conditions of employment
council ii) Form a federation of unions from the same
industry or occupation at the national level
iii) Promote the formation of cooperative societies
and to foster workers’ education
CITU i) Central committee Organizing workers to further their interests in
(national level, economic, social and political matters
general council)
ii) State committee
iii) Affiliated unions
BMS i) Establish Bharatiya order of a classless society

ii) Assist workers in organizing themselves as trade
unions as a medium of service to motherland
irrespective of faiths and political affiliations
iii) Right to strike
iv) Inculcate in the minds of workers the spirit of
service, cooperation and dutifulness
v) Establish a socialist society
vi) Establish a workers’ and peasant state in India
vii) Nationalize and socialize the means of
production, distribution and exchange
viii) Safeguard and promote the interest, rights
and privileges of all workers in all matters,
social cultural, economic and political
M06_SING6013_01_C06.indd 106 6/18/10 11:41:07 AM

Table 6.1 (cont.)

ix)Secure and maintain the workers’ freedom objectives of the major
of speech, freedom of press, freedom of trade unions in India.
association, freedom of assembly, right to
strike, right to work and social security
x) Bring about unity in the trade-union
movement
UTUC i) General body

ii) General council
iii) Working committee
Box 6.1 describes the structure and the stated objectives of the major trade-union orga-
nizations in India.
The ideologies of the different TUs can be described briefly as under:
AITUC: Opposed to adjudication, but also agrees that everything should not be left
to the two parties to sort out without State intervention
UTUC: Favours conciliation and adjudication but resents the government’s discre-
tion in the matter of reference of disputes to adjudication
HMS: Favours collective bargaining and is strongly opposed to compulsory adju-
dication. It is, however, open to State intervention in case conciliation fails and also
favours the right to strike as a weapon for bargaining
INTUC: Condemns strike and has played the conventional role of raising the issues
of labour welfare and working conditions
CITU: Objectives have a socialistic flavour with a demand for public ownership of
industry
6.5 The Problems of Trade Unions in India

A lot has been written and discussed in various forums about the problems of trade unions
in India, but very little has been done in this regard. India has the largest number of trade
unions, yet their growth and effectiveness have not been very significant. The reasons and
problems that have been detrimental are enumerated below and then discussed briefly to
prepare ground for understanding the trade union’s role in the current context of employee
relations management.
6.5.1 The Politicization and Proliferation of Unions

Even though the stimulus to form trade unions was the economic hardship of the work-
ers, the influence of various historical and institutional factors and the social, economic and
political developments in the country made the trade unions assume a political character.
The political affiliations of the national federations and the local unions taking protective
cover under these federations resulted in a lot of political interference in the union activities.
Most of their activities could be better explained in political terms, rather than on worker-
interest concerns. As unions are closely aligned to political parties, political leaders continue
to dominate the unions even now. The use of political methods and using labour groups to
create vote banks has made the trade-union movement in India more political than labour-
inspired or labour-driven. This has resulted in trade unions being grossly misused by politi-
cians to serve their own narrow, political aspirations.
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108 Part I Context
BOX 6.1 RECOMMENDATIONS OF THE SECOND NATIONAL COMMISSION

ON LABOUR
We strongly believe in the role that bilateral interaction, dialogue and negotiations
can play in promoting harmonious industrial relations. In a sense, bilateralism is
the recognition of the stake that workers and the management have in the viability
and success of the undertaking. Our Trade Union movement today is fragmented.
Everyone talks of the value of unity, the imperative need of unity today, but in prac-
tice, hardly anyone seems to be willing to give up separate identities. One of the
ways to strengthen the incentives for consolidation can lie in the field of registra-
tion and recognition, where the criteria for eligibility can be upgraded or at least
proportionately upgraded.
Negotiating agent should be selected for recognition on the basis of the check-off
system, with 66 per cent entitling the union to be accepted as the single negoti-
ating agent, and if no union has 66 per cent support, then unions that have the
support of more than 25 per cent should be given proportionate representation on
the college.
The question of the method that should be used to identify the bargaining agent
has been the subject of discussion and debate for many decades now.
The Commission carefully considered the advantages and disadvantages of the
relevant options. In dealing with this issue, we had to keep in view our belief
that collective negotiations require a strong trade-union movement, which, in its
turn, demands an increasing degree of unionization. Any formula which militates
against increasing unionization should, therefore, ab initio be avoided.
Secret ballot even on a restricted basis is logistically and financially a difficult pro-
cess in industries like railways, banks, post offices, coalmines and other undertak-
ings operating in a number of states.
Check-off system has the advantage of ascertaining the relative strengths of trade
unions based on continuing loyalty reflected by the regular payment of union sub-
scription. The argument advanced against the check-off system is that it exposes
the loyalty of the worker, and this may make him vulnerable to victimization by the
management or persecution by members of other unions.
Check-off system in an establishment employing 300 or more workers must be
made compulsory for members of all registered trade unions.
Though the check-off system will be preferred in the case of establishments employ-
ing less than 300 persons too, the mode of identifying the negotiating agent in
these establishments may be determined by the LRCs. Any union in such smaller
enterprises may approach the LRCs for conducting a secret ballot. We are recom-
mending a slightly different dispensation for units employing less than 300 as we
feel that it is in such units that the possibility of victimization has to be provided
against.
We would also recommend that recognition, once granted, should be valid for a
period of four years, to be co-terminus with the period of settlement. No claim by
any other trade union/federation/centre for recognition should be entertained till
at least four years have elapsed from the date of earlier recognition. The individual
workers’ authorization for check-off should also be co-terminus with the tenure of
recognition of the negotiating agent or college.
The multiplicity of trade unions is also an outcome of dissident groups and break-away
political parties emerging in the Indian polity. A split in political ideology results in a split
in the trade union professing the same ideology. With proliferation of a large number of
unions, the multiplicity character at the plant level provides little or no bargaining power to
a union. Further, with so many unions operating at the unit level, their size is considerably
M06_SING6013_01_C06.indd 108 6/18/10 11:41:07 AM

reduced. Besides, there are ambiguities of dual membership, wherein names are repeated in
the member lists of two or more unions. The divide-and-rule syndrome has only reduced the
solidarity of the workers and given more bargaining power to the management.
6.5.2 Outside Leadership

The Indian trade-union movement, from the very inception, was closely associated with the
Freedom struggle and, thus, led by national leaders. Post-Independence, every political party
patronized a particular union and provided the much-desired leadership. It needs to be appre-
ciated that the worker community at the time of Independence was illiterate and migratory
in nature, having come from agricultural regions, and taking breaks, during the harvesting
season, to go back to their original roots. The social status between the management and the
workers, and their educational and communication levels being different, this intermediary
external leadership was beneficial to both workers and management. Further, the resource-
starved unions got some financial support from the national federations in times of need.
6.5.3 Inter-union Rivalry

The multiplicity of unions emerging from political affiliations and led by external political
leaders brought to fore the politics of many and the dynamics associated with it. Unions The major problems
became competitive, and the survival of the fittest led to inter-union conflicts and mutual faced by trade unions in
accusations being traded freely. This became advantageous for the management, which fol- India are:
lowed the policy of “divide and rule”. The predominance of inter-union rivalry has entered Outside or political
the very roots of trade unionism in India, and is one of the most significant factors that has leadership
pushed them to the periphery in the current global economic environment. Multiplicity of unions
and inter-union rivalry
Small size of the
6.5.4 Intra-union Rivalry unions
Indian trade unionism has also demonstrated the intra-union rivalry coming to the forefront Low membership
and hampering production and industrial relations. The National Commission on Labour Uneven growth
remarked that while healthy rivalry and opposition are necessary within the democratic Poor financial position
structure of any trade union, it can have pernicious effects when motivated by personal con- Low level of knowl-
siderations. The NCL recommended that intra-union rivalries should best be left to the cen- edge of labour legisla-
tion
tral workers’ organizations concerned to settle disputes, and that labour courts should step in
Fear of victimization
at the request of either group or on a motion by the appropriate government in cases where a
central organization was unable to resolve the dispute.
6.5.5 Small Size

The small size of trade unions is an outcome of the Indian Trade Unions Act of 1926, which
allows a large number of small unions to be registered. With multiple unions operating, the
size gets reduced and with inter-union rivalry taking centre stage, new employees shy away
from becoming members. It also needs to be noted that women employees, who now account
for a large section of the workforce, refrain from joining any union, and this has also impacted
the size and growth of unions in India.
6.5.6 Financial Insecurity

The membership fee, which is the major source of revenue for the Indian trade unions, is low,
given the low per capita income of the workers. More often than not “ad hoc” payments are
made rather than regular payments. They do not get any financial support from any agency,
as opposed to the situation in America, where the National Federation of Central America
makes regular contributions. The insufficiency of funds affects their working, and their orga-
nization is dependent on honorary workers whose time availability to focus exclusively on
workers’ interests is limited.
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110 Part I Context
6.5.7 The Changing Demography of Workforce

Apart from the low membership coverage and fragmentation of the trade unions, there
is evidence of a decline in membership, growing alienation between trade unions and
membership, particularly due to changing characteristics of the new workforce and the
waning influence of national federations over the enterprise unions. The new pattern
of unionization points to a shift from organizing workers in a region or industry to the
emergence of independent unions at the enterprise level, whose obsession is with enterprise-
level concerns with no forum to link them with national federations that could secure
for them a voice at national policy-making levels. The shift in employment from the
organized to the unorganized sector discussed in the earlier chapters adds to the frag-
mentation of the unions. To sum up, the Indian trade-union movement is closely affili-
ated to political parties, and has narrow support base on account of small-sized multiple
unions operating at the unit level. The centralized decision-making, ad hoc manage-
ment, obsolete strategies, external and over-aged leadership that is more personalized
and power-oriented makes it less labour-oriented and more politically motivated. The
confrontationist attitude, non-existent second-tier leadership, and negligible women
representation dilute its credibility and, hence, do not provide motivation for the new
workforce to become members of a union.
6.6 The Recognition of Unions

One of the critical problems in industrial relations facing trade unions, government
and employers for a long time is to evolve a satisfactory and acceptable way to settle the
competitive claims of rival unions for being declared the sole bargaining agent. This is
essential for collective bargaining to be successful. There is no uniform law covering
the entire country stipulating the employer to recognize a union, nor any spelt-out
procedure for the recognition of a union; managements either refrain from doing so or
recognize a union of their choice. Recognition is the process whereby the management
accepts a particular trade union as having a representative character and, hence, will-
ing to conduct discussions with them pertaining to workers’ interests. A union, once
recognized, continues to enjoy the powers associated with it, irrespective of their cur-
rent membership or credibility among the workers. As workers are unsure about which
union holds a key to management lobbying, they become members of more than one
union. The Bombay Industrial Relations Act, 1946; The Madhya Pradesh Industrial
Relations Act, 1960; and the Industrial Disputes Act (Rajasthan Amendment), 1958
provide for the registration of unions as the representative union, subject to their ful-
filling certain conditions.
There are two issues with regard to recognition—one is recognition in an un-unionized
situation and in a multi-union situation, and second is the verification process. The verifica-
tion process based on membership creates ambiguity as the same names are found in the
membership list of rival unions. Secret ballot is a solution that can be taken up by the State
machinery on the request of the management. There is no legislation in this regard and ad-
hocism prevails. In Gujarat and Maharashtra, unions are classified as representative, qualified
and primary. Recognition requires 15 per cent of employee strength, qualified union should
have membership of over 5 per cent of industry employment and primary union 15 per cent
or more employees enrolled at the plant level. The relevant provisions regarding union rec-
ognition in the Mumbai IR Act are as under:
1. Where there is more than one union, a union claiming recognition should be func-
tioning for at least one year after registration. Where there is only one union, this
condition would not apply.
2. The membership of the union should have over at least 15 per cent of the workers
in the establishment concerned. Membership would be counted only for those who
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paid subscriptions for at least three months during the six months immediately pre-
ceding the reckoning.
3. For a union operating in an industry in a local area, the prescribed membership was
fixed at 25 per cent.
4. A union recognition would be binding for a period of two years.
5. Where there are several unions, the one with the largest membership should be
recognized. Only the unions observing the Code of Discipline would be recognized,
provided other conditions are fulfilled.
6.7 Rights of Recognized Unions

Most of the cases of inter-union rivalry/disputes relate to the issue of recognition of a sec-
ond or a third union. In many similar establishments, the managements refuse to recognize
any union at all. See Box 6.2. This is especially true of attempts to unionize the informal
sector of industry.
Suggesting a remedy to this problem, the first National Commission of Labour observed
that “this situation can only be set right by a proper demarcation of the rights and functions
of the industry/area of recognized unions and plant-wise unions, and by ensuring that rec-
ognition at the industry/area level is conferred subject to certain well-defined conditions. We
consider that industry-wise recognition is desirable, wherever possible. A union recognized
as the representative union under any procedure should be statutorily given, besides the right
of sole representation of the workers in any collective bargaining, certain exclusive rights and
facilities to enable it to effectively discharge its functions.”2 These rights, in the Commission’s
opinion, would include:
a) The right to raise issues with the management
b) The right to collect membership fees within the premises of the organization
c) The ability to demand check-off facility
d) The ability to put up a notice board on the premises for union announcements
e) The ability to hold discussions with employees at a suitable place within the
premises
f) The right to discuss members’ grievances with the employer
g) The ability to inspect beforehand a place of employment or work of its members
h) The nomination of its representatives on committees formed by the management for
industrial relations purposes as well as in statutory bipartite committees.
These rights largely repeated the Right of Recognized Unions incorporated in the Code of
Discipline at the 20th session of the ILC in 1962. For minority or non-recognized unions
(shelved by the ILC), the Commission suggested that they be allowed only the right to rep-
resent the cases of dismissal and discharge of their members before the labour court (NCL,
1969, Para 23.61). Most of these rights were available under the Bombay Industrial Relations
Act, 1946, some under the Madhya Pradesh Act, 1960, and only the collective bargaining
right under the Industrial Disputes Rajasthan (Amendment) Act, 1958. But the first two also
had provisions of unfair labour practices.
Should we have a uniform law requiring the management to “recognize” a union? Is it

desirable? Can you discuss the practicalities of having or not having such a law?
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112 Part I Context
6.8 Unfair Labour Practices with Regard

to Trade Unions
The main concept of unfairness in labour practices relate to management interference in
the relations between a union and its members or between two unions, or the freedom of
employees to choose a union. The unfair labour practices of the unions are rarely discussed
in negative terms and are considered methods of protest. In the USA, unfair labour practices
are a long list of don’ts for the unions. For instance, the primary unfair labour practices to
be avoided are the refusal of a recognized union to bargain in good faith, coercive activi-
ties, union instigation or active support for an illegal strike, physical prevention of willing
employees from joining work during a strike, intimidation of employees or managerial staff
during a strike, go-slow or squatting on work premises after working hours, forced confine-
ment of managerial staff and demonstrations at the residence of employers.
The Bombay IR Act provides that “management cannot dismiss, discharge or reduce any
employee of such union or punish him in any order manner merely because he is an officer or
member of the registered union or a union which has applied for recognition under the Act”
(Section 101). This provision is necessary to protect union activists from being victimized by
managers for their union activities. Without this protection, the right to association becomes
hollow.
The Industrial Disputes Act, 1947, includes amendments made in 1982 to Chapter V,
containing provision against unfair labour practices. The Fifth Schedule of the Act details
the specific practices considered illegal. Primarily, the management’s victimization of trade
unions by such activities as the denial of promotion or punitive transfers, management inter-
vention in trade-union affairs, union coercion of workers to join a union, or threats for not
joining, or the use of violence have all been included as unfair practices. Box 6.1 lists a few
important recommendations of the Second National Commission on Labour pertaining to
the issue of recognition.3
6.9 Trade Unionism in India Today

Unions today do not show any distinctive pattern. Unionization is different in differ-
ent industries and also their impact varies from state to state. The key industries had
industry-level unions dominated by external leadership with unit- or plant-level issues
dealt with by the unit leadership. Collective bargaining was at the industry level in core
sectors of the economy like steel and coal. Plant-level bargaining existed in BHEL, HMT,
etc. The private-sector industries, as a practice, discouraged the formation of unions,
and wherever they existed, collective bargaining was at the plant level. Union density
is directly proportional to the size of the industry in India. In small units, unions are
practically non-existent.
The multi-union rivalry and the competition among the different trade unions have effec-
tively diluted the power base of the unions. Though unionization is in recession the world
over, and India is no exception, but the reassertion of capitalism under the New Economic
Policy has been the major reason for the decline in the unionized workforce. In addition,
worker mobility, and the changing demography and aspiration level of the new workforce
dispel the pluralistic principle of unionization.
By and large, unionization in different industries and sectors has followed different pat-
terns. The traditional industries exhibited a pattern of industry-level unions, whose leader-
ship was largely external, with plant-level industrial relations taken care of by plant-level
leadership. Collective bargaining in industries like jute, tea, coal and banking take place
at the industry level. Many public-sector industries, particularly in the core areas like steel
and coal, also follow this pattern. However, there are also several public-sector undertak-
ings where unions were formed at the plant level, but combined thereafter for bargaining
purposes. Examples of this type may be observed in Bharat Heavy Electricals, Hindustan
Machine Tools, and so on.
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The private sector, other than traditional industries, has exhibited a different pattern
Trade Unionism in India
again. Generally, enterprises with multinational origins, had plant-level unions, which were today
discouraged from forming federations with other unions, either in the region or in the other
plants of the same company. Bargaining takes place at the plant level with separate agree- Unionization accord-
ing to industry/region/
ments for different plants or units. This practice, while making the unions quite powerful in state
their respective domains, prevents large-scale concerted action. In the government transport 70,000 registered
sector, like airlines or railways, powerful craft unions operate. TUs, many not regis-
Compared to this, there is hardly any unionization at all in the medium- or small-scale tered
sector. If present at all, they are usually small, divided and weak, and unable to stand up to 2 per cent of the work-
management, either in bargaining or in other spheres. Union density in India, being directly force unionized
proportional to the size of the organization, is thus becoming almost zero in small units. PSUs: Industry-level
The problems of organizing this sector are related to the uncertainty of jobs and personnel. collective bargaining
in coal/steel; enter-
Unionists or workers trying to organize unions may be dismissed promptly, and since there prise level elsewhere
is no job security, they are treated with suspicion by workers. It is only when major crises Private Sector—Plant-
confront such workers that they turn to unionism or welcome regular organizers. Even if level collective bar-
an organization starts, regular unions find it difficult to keep track of workers in these units, gaining
since they are laid off, or the unit is closed, or shifted to some other location. Union density Union density accord-
is, therefore, related to the lack of organizing freedom in India. ing to the size of
Trade unions today are facing more and more competition among themselves. At the industry
same time, they are also facing a much more determined management response. They are, Craft unions in the
government transport
thus, fighting on both fronts. But this is a common feature in many countries of the world and sector
not confined to India alone. Low unionization in
Unionism is in recession today. The decades of the 1980s and the1990s have been bad SMEs
years for trade unionism all over the world. Union membership has been declining in most Twin battle against
developed countries, with the USA and the UK leading, and even Japan not far behind. inter-union competi-
Unions need to understand the three sets of forces working against them. But trade unions, tion and assertive
even today, consider themselves as the sole representatives of the working class in India. The management
Indian Trade Unions Act of 1926 has undergone a number of minor amendments, but the Like global trend,
unionization in India
overall framework of the Act has remained unaltered. According to the Act, any group of under recession
seven persons could form a union. There are, however, discussions to bring in amendment to
raise the number to 100 or 10 per cent of the employees as minimum required for the regis-
tration of a trade union.
The Indian Trade Union Movement (ITUM) held its centenary celebrations in 1992. The
ITUM membership has remained stagnant, and its activities have been more or less confined
to the organized sector, more so to the public-sector enterprises—from where over 70 per cent
of its membership is drawn. Since the focus of ITUM was the workers in the organized sec-
tor, particularly, those employed in the government-owned establishments, the concerns of
the unorganized workforce sector has remained out of its focus. The trade unions, too, are
now trying to penetrate the unorganized sector. This has been evident in tobacco, construc-
tion, fisheries, forestry and film industries. It needs to be examined whether the enrolment
for union membership has led to alleviating the concerns of the workers in these industries,
as the techniques used in organized employment may not easily work in the unorganized
sector, since the government controls are weaker in this sector. The five central trade-union
organizations accorded recognition of being national centres of trade unions are the BMS,
with maximum verified membership, followed by INTUC, CITU, HMS and AITUC. In addi-
tion, there are a large number of non-affiliated/independent unions functional particularly in
the unorganized sector and private/joint-venture companies. Then there are other forms of
workers’ organizations, such as Morcha, labour cooperatives, NGOs, etc. performing the role
of promoting workers’ welfare.
During over a century of its existence, the trade unions in India have grown in size and
strength, despite the fact that their membership account for no more than 2 per cent of the
Indian workforce. As of now, the trade-union movement in India comprises over 70,000
registered unions and an unaccountable number of non-registered organizations engaged
on the issue of promoting and protecting workers’ interests. The politically affiliated unions
have consolidated themselves by establishing a well-developed federal structure. They have
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114 Part I Context
established their federations at the state and the district levels as also industry-wise. The
unions that are not politically affiliated, on the other hand, are fragmented, despite being very
professional, financially sound and effective. Their involvement in policy-making bodies is
almost negligible.
In spite of these weaknesses, the trade unions occupy a significant position in
India, more so in matters relating to labour policies. Politically, almost every political
party patronizes the trade unions as they have a strong influence in garnering labour
votes, in the key industries such as cement, iron and steel, coal, heavy electrical, trans-
portation, textile, dock, banking, etc. Thus, in India, the working class in the orga-
nized sector exercises political and economic power far in excess of what their number
warrant.
A concluding assessment of Indian trade unions could be made in the context of legal
rights that they have. This legal framework depends on the following factors:
The immunity of trade unions and the degree of such immunity
The rights and obligations of unions towards employers, the community and their
members
The access trade unions have to information
Settlement machinery
Consultation with management
Relations of unions with their members and the rights of rank and file
Procedures regarding funds, financing, use of funds, elections and duties of office-
bearers
Status vis-à-vis management or claims against management or against other unions
(this is particularly important in a multi-union situation)
Limitations on industrial action such as restrictions on strikes or lockouts
The main laws that allow or restrict the unions are the Trade Unions Act, 1926 and the
Industrial Disputes (ID) Act, 1947. The provisions under The Trade Unions Act are discussed
in the following paragraphs. Under the ID Act, trade unions have considerable degree of
freedom to strikes in small organizations (employee strength below 100). For larger organi-
zations, unions have to follow certain sets of procedures by giving the notice before a strike.
There are also restrictions on strikes or direct industrial action during and for some time after
conciliation or arbitration proceedings.
There are no provisions in either of the two acts, which lay down guidelines for rela-
tions with their own members. Except for the need to call annual general meetings, which is
common for any type of organization in all types of situations, there is very little that union
members can do against their own leadership. The procedures for removing a leader are so
much a matter of political and group dominance, that members have little power to do any-
thing. This may be one of the reasons why there is so much dissidence within unions, leading
ultimately to splits and fragmentation. Political affiliation helps to fan dissidence. There is no
provision on strike ballot, a basic tool in many countries, which gives rank and file members
some control over the most decisive tool in the hands of the unions. This implies that union
leaders can take a decision on strike without really consulting many of its members.
6.10 The Trade Unions Act, 1926

The Trade Unions Act, 1926 provides for the registration of trade unions with a view to
render lawful organization of labour to enable collective bargaining. It also confers on a reg-
istered trade union certain protection and privileges.
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6.10.1 Scope and Coverage

The Act extends to the whole of India and applies to all kinds of unions of workers and
associations of employers, which aim at regularizing labour–management relations. A trade
union is a combination, whether temporary or permanent, formed for regulating the rela-
tions not only between workmen and employers, but also between workmen and workmen
or between employers and employers.
6.10.2 Objectives
The main objectives of the Act are to:
i) Provide for the registration of trade unions and
ii) To accord registered trade unions a legal and corporate status, immunity to office
bearers and members from civil and criminal liability in respect of legitimate trade-
union activities. This protection is provided for under Section 120 B, sub-section 2
of The Indian Penal Code.
6.10.3 Provisions
The Act, therefore, stipulates the following:
The Trade Unions Act, 1926 was enacted mainly in deference to the ILO convention,
the recognition of the right of workers to organize and also to strengthen the bargain-
ing power of the workers.
The Act aims to provide for the registration of trade unions and, in certain
respects, to define the law relating to registered trade unions. The objective of the
Act is to:
䊊 Lay down conditions governing the registration of TUs
䊊 Define obligations of a registered TU
䊊 Prescribe rights and liabilities of a registered trade union
DEF INIT IO N. Trade Union: It means a combination, whether temporary or perma-

nent, formed primarily for—the purpose of regulating the relations between workmen or
employers for imposing restrictive conditions on the conduct of any trade or business, and
includes any federation of two or more unions.
REG IST RAT IO N. Any trade union formed with at least seven members may apply
for registration to the Registrar with the following documents:
i) A copy of the rules of the trade union

ii) Names, occupation and addresses of members making the application
iii) Name of the trade union and address of its office
iv) Designation, names, age, addresses and occupation of the office
v) Bearers of the trade union
vi) In case already in operation—submit statement of accounts/assets and liability
statement
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116 Part I Context
RULES. The rules of trade union require constitution of its executive with the following:
The name of the trade union
Objectives for which it is established
The membership list in a form that can be made available for inspection
The purpose for which funds shall be applicable
Members to be persons actually working in the unit/industry
Honorary/temporary office bearers in the executive
Payment of subscription to be less than 25 paise
Conditions under which members entitled to any benefit/fines to be imposed
The manner in which rules shall be amended, varied or rescinded
The manner in which office bearers shall be appointed
Safe custody of funds
The manner in which the trade union may be dissolved
The Registrar, if satisfied with the requirements, shall register the trade union by entering
the information in a register, to be maintained in a prescribed form. In case all terms of the
Act are complied with, it is obligatory upon the Registrar to register the union, and he has no
discretion in this matter.
Registration may be cancelled if the Registrar, at any point during verifications, is certain
that the registration was obtained by fraud or mistake, or it ceased to exist, or has contra-
vened any provisions in the Act.
ON REGISTRATION. A trade union, after registration, acquires the following characteristics:

It becomes a body incorporate by the name under which it is registered, and it
becomes a legal entity distinct from its members of which it is composed.
It has perpetual succession and a common seal.
It has the power to acquire and hold both movable and immovable property.
It has the power to contract.
It can, by the name under which it is registered, sue and be sued. Under the present
law, registration is not compulsory. Unregistered trade unions are not illegal either.
But the benefits conferred by the law on registered unions will not be available to unregis-
tered trade unions. An unregistered union has neither corporate existence nor legal entity.
RIGHTS AND LIABILITIES OF REGISTERED TRADE UNIONS. Section 15 of the

Act provides for certain obligations and liabilities of registered unions and also stipulates the
purpose for which funds can be utilized.
T HE AM ALG AM AT I O N O F T R AD E UNI O NS. Any two or more registered

trade unions may become amalgamated together as one trade union, with or without dissolu-
tion for division of funds of such trade unions, or either or any of them, provided that (a) the
votes of at least half of the members of each or every such trade union is entitled to vote are
recorded; and (b) at least 60 per cent of the votes recorded are in favour of the proposal.
D IS SO LUT I O N. When a registered trade union is dissolved, the notice of the dis-
solution signed by seven members and by the secretary of the trade union is required to be
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submitted within 14 days of the dissolution to the Registrar for verification as to whether
the dissolution has been effected as per rules of the union. In case the rules do not provide
for distribution of funds consequent to the dissolution, the Registrar shall divide the funds
among the members in such manner as prescribed. The members can alternatively form
another society under the Societies Registration Act, 1869, for the purpose of recovering the
said properties.
6.11 Managerial Trade Unionism

In India, we have unions in the executive cadre as well, such as civil services, doctors, electric-
ity board, bank officers, merchant navy officers, etc. These associations among white-collared
workers are more pronounced in the public sector. In the private sector, officers’ associations
(not unions) exist in Grasim, Tata Electric, ITC, Glaxo, etc. The white-collar unionism in
India today has brought into its fold even professionals like college and university teachers,
engineers and resident doctors. The characteristic difference between the worker unions and
these associations are that they are loosely knit, focus on few issues and have a narrower
perspective. Most of them are registered under the Societies Registration Act rather than the
Trade Unions Act, even though their activities and functions are more on the lines of a union.
The reasons for their unionization are the same as that of trade unions but are more protec-
tive than regulatory. The emergence of these unions has invariably been attributed to the ero-
sion of their social status and the treatment from the employer on their issues and concerns;
the management reaction to these associations has not been considered very positive either.
SUMMARY
The Indian trade-union movement is over a century old make the formation of unions even with mere seven
but is still coping with problems of small membership and members possible, thereby creating a large number of trade
financial insecurities. unions in the country.
The political affiliations have resulted in external leadership, The Act is, however, silent on statutory recognition of trade
and politicization created break-away factions and unions, which is the essential foundation on which collective
multiplicity of unions. bargaining can be made successful.
The inter-union rivalries and dynamics associated with it As in the rest of the world, in India too, there has been a
have made trade unionism in India ineffective, and post–New decline in the growth of trade unionism as a consequence of
Economic Policy, they have been pushed to the periphery. the process of globalization and liberalization.
The provisions of the Trade Unions Act, though

comprehensive in terms of registration and deregistration,
KEY TERMS
agency shop 104 open shop 104 trade unions 101
check-off 104 preferential union shop 104 union shop 104
closed shop 104 sole bargaining agent 104
REVIEW QUESTIONS
1 Define the following terms: d. Recognized trade union
a. Trade unions e. Preferential shop
b. Check-off f. Agency shop
c. Registered trade union g. Closed shop
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118 Part I Context
h. Open shop 7 When can the registration of a trade union be cancelled or

withdrawn?
i. Sole bargaining agent
8 Is the amalgamation of two or more trade unions possible?
j. Union security
How can this be done?
2 Describe briefly how trade unions are registered and
9 Define the scope and objectives of The Trade Unions Act, 1926.
certificates of registration issued.
10 Differentiate between
3 What are the rights of a registered trade union?
i. Craft and industrial unions
4 What are the characteristics of trade unions?
ii. Preferential union shops and closed shops
5 Why do you think the recognition of trade unions in every
establishment should be done? What are the disadvantages iii. Registered and recognized unions
for the employer?
6 What is a trade union and how is it generally formed?

1 Discuss some of the problems of trade unions in India 5 Discuss some of the problems of trade unions in India
and the recommendations of the National Commission of and suggest steps that can be taken to improve the
Labour in this regard. same in the current-day context of multinationals and
a growing unorganized workforce. Are the National
2 What are the functions of trade unions? Examine whether the
Commission of Labour recommendations still
trade unions in India have been able to fulfil these functions.
applicable?
3 Taking into consideration the existing problem of trade
6 Discuss the changing role of trade unions and the
unionism in India, suggest measures for strengthening trade
resultant impact of union–management relations
unionism and give reasons for the same.
consequent to globalization and technological
4 In the current day competitive environment, has the role of breakthroughs in industry.
trade unions changed? Explain and describe its impact on
the industrial relations climate.
D E B AT E
1 Does India’s booming information technology and information- 2 Though India has the largest number of trade unions,
technology-enabled-services (IT/ITES) industry, which their contribution to industrial work life has not been
employs almost one million professionals, require a trade phenomenal.
union to fight for its rights?
Inter-union Rivalry The court simultaneously revoked the recognized union status
accorded to another worker group Bharatiya Kamgar Sena or
Given below is an extract of a news item relating to Bajaj4 Auto Ltd.
BKS, backed by the Shiv Sena party, partly on whose support
Analyse the legal issues emanating out of this and the alternatives
company chairman Rahul Bajaj got elected to the Rajya Sabha
available to the management to cope with this problem.
last year.
The stalemate between workers, unions and the management of
The Bajaj Auto management has been negotiating workers’
the two-wheeler manufacturer Bajaj Auto Ltd took an unexpected
issues such as wages only with BKS in the last two years. VKS
turn with the Pune industrial court declaring the automaker’s
insists that it will hold talks with the firm’s management only
biggest workers’ group, Vishwa Kalyan Sanghatana or VKS as
after it allows workers into the premises of the Akurdi factory
the “recognized” union at the firm’s Akurdi mother plant since it
that has been shut down since 1 September. Some 1,400
had support of the majority of the workers.
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workers have been striking work since then demanding that form a union to fight for their rights and job protection,” said
Bajaj Auto bring back production of two-wheelers shifted Narayan Ram Hegde, who works for the Union of Network
out to units at Aurangabad and Uttarakhand. VKS, which is International in India.
fighting the BKS union recognition since November 2005,
But Hegde says the task is not going to be easy because young
says it has the support of more than 1,600 of the 2,700
IT professionals always have a negative image of trade unions
workers at Akurdi, while BKS has a following of just a few
in India.
hundred.
A number of organizations for IT professionals now exist at the
The IT industry and Trade Unions
state level in Hyderabad (in Andhra Pradesh) and Bangalore (in
Read the following news item5 and then discuss the questions
Karnataka).
below:
Left leaders say the idea now is to broad base this forum into a
The Leftist trade unions insist that it is high time the massive
politically empowered union that can demand and stand up for
industry, which contributes more than 4.5 per cent to the
the rights and protection of IT workers.
country’s national economic output, had a trade union to
protect their jobs. Here is what some of the employers from the industry have to say
about unionization of the workforce:
The Indian ITES-BPO (business process outsourcing)
industry aggregated revenues to the tune of $5.2 billion in Kiran Karnik, President, National Association of
2004–05. Software and Services Companies (Nasscom):
The proposal to forge a union for IT workers has now come “Employees in IT and ITES sector do not need any external
from the Centre for Indian Trade Unions (CITU)—the trade- intervention as they are looked after very well. It is not
union wing of the Communist Party of India (Marxist)—the a good move and I don’t think it would succeed. The
largest Left party in the country. employees who think of themselves as the CEOs of the future
may not support it.”
So why do white-collar IT professionals need a trade union?
R. Vidyasagar, Director (HR), Philips Software India:
“A union for IT workers is the urgent need of the hour. I would “There is no need for a third-party intervention and it did
call the IT professionals ‘the labourers of the information age’. not augur well for the industry. I feel that unionism will
They toil long hours; they work at night; and some of them still not take off as employees will not like to be led by
get meagre salaries. So a labour union for them would help somebody else. We need to maintain our pre-eminence in
fight for their rights,” according to the CITU president. To begin the IT and ITES sector as countries such as China are fast
with, CITU, in collaboration with other Left-unions—like the All catching up.”
India Trade Union Congress—wants the Union government to
enact a law separately to deal with the labour issues of the IT Raman Roy, ex-CEO, Wipro BPO: “I have no problems with
industry. a union in the BPO industry, as long as it guarantees that no
employee will leave the organization before one year. The union
“Yes, there is an urgent need for a labour law exclusively for the should work with the BPO industry to control the menace of
IT industry. It is the one sector that is booming across India, and attrition.”
we need to frame a legislation for IT workers. We are going to
take up the issue with the Manmohan Singh government soon,” Prosenjit Ganguly, Head (HR), HTMT, a BPO firm: “The
said the Community Party of India national secretary. move to unionize workers is a retrograde step and would spell
disaster for the industry. After having reached this level, any
How are the Left trade unions going ahead to form the unions
attempt to unionize the workers would set us back.”
for IT workers?
1. What do you think are the reasons of non-unionization in
“It is not going to be easy. Already, we have begun the
the emerging sectors like IT/ITES?
process to hold consultations with many senior IT employees
in places like Kolkata, Bangalore, Chennai and Trivandrum 2. Look at the reasons from the business as well as the socio-
(Thiruvananthapuram). We do hope to establish a proper psychological perspective. Why do you think trade unions
union soon,” a Union Leader of CITU pointed out. have failed to make inroads?
Left leaders say there is also already tremendous backing 3. Make out a comprehensive case from the management side
from the Union of Network International, a global alliance of as to why it is not a good idea for allowing unionization in
900 trade unions, to forge an IT industry workers’ union in this sector.
India.
4. What kind of workplace regulatory mechanism do you
“IT industry professionals in India are ‘cyber coolies’. We are foresee in the coming years in this sector? On what do you
trying to organize them and convince them on the need to base your analysis?
M06_SING6013_01_C06.indd 119 6/18/10 11:41:11 AM

120 Part I Context
NOTES
1 Ministry of Labour and Employment, Government of India, 4 Sudha Menon, “Bajaj Auto Workers Union Gets Court
“Chapter XX” Report of National Commission on Labour, Recognition,” Mint, 17 October, 2007.
1969: para 20.17.
5 George Iype, Does the IT industry Need a Trade
2 Report of the National Commission on Labour (1969), Union? 6 October 2005. Available on www.Geojit.
Government of India Press, para 23.58 comhttp://202.54.124.133/money/2005/oct/06bspec.htm
3 “Recommendations”, Report of the National Commission on

Labour, p. 41.
SUGGESTED READING
Ramaswamy, E. A. “Managerial Trade Unionism”, EPE, Vol. 21, 1985. Sharma, B. R. Managerial Unionism: Issues in Perspective (New
Delhi: Shriram Center for Industrial Relations, 1993).
Reports of the National Commission on Labour (1969 and 2002),
Government of India.
M06_SING6013_01_C06.indd 120 6/18/10 11:41:11 AM

part ii
paradigm shift
M07_SING6013_01_C07.indd 121 6/15/10 3:00:01 PM

chapter seven
7.1 A Shift in Focus After reading this chapter, you should be able to:
7.2 Employee Relations Management • Appreciate the need and relevance of
7.3 Industrial Relations and Employee the change from “industrial relations” to
Relations: Differences in Perspectives “employee relations”
• Differentiate between employee relations
and industrial relations in terms of
influencing factors, operating principles,
scope, objectives and its linkage to other
HR functions
• Identify the preconditions for good
employee relations management
• Differentiate the line and staff role in
employee relations
• Understand the practical implications of the
paradigm shift from industrial relations to
employee relations in terms of the role of
the line and HR manager
They Also Produce Steel

The Tata Group’s relationship with its employees has changed from the patriarchal to the practical, but this is a bond that
continues to be nourished with compassion and care. The focus, clearly, is on the relationship with employees, which is both
individualized and also has a collective approach.
The Tata Group touches and moulds the everyday lives of more people than any private-sector employer in the country.
The richness of this relationship, fashioned by a tradition of benevolence and empathy, represents a workplace culture that
goes way beyond work.
As any “Tata person” will tell you, there is something positively distinctive, something less than completely explainable,
about working for the group—the experience is cast in a hue quite different from the ordinary. This view continues to hold
despite the changes that have altered the way the Tatas interact with their people, moving from the paternalistic philosophy
of yore to bringing the group in line with the ever-evolving, human-resource methodologies.
The transition from then to now has not eroded what remains a central theme with the group—providing its employees more than
mere jobs. Workers and their welfare were of utmost importance to the group founder Jamsetji Tata, who, writing to his son Dorab
Tata in 1902, five years before a site for his proposed steel enterprise had been decided, stated: “Be sure to lay wide streets planted
with shady trees, every other of a quick-growing variety. Be sure that there is plenty of space for lawns and gardens. Reserve large
areas for football, hockey and parks. Earmark areas for Hindu temples, Mohammedan mosques and Christian churches.”
To understand the dynamics of the present, it is necessary to peep into the past. The Tatas pioneered a slew of employee
benefits that would later be mandated through legislation in India and elsewhere in the world. The eight-hour working
day, free medical aid, welfare departments, grievance cells, leave with pay, provident fund, accident compensation, training
institutes, maternity benefits, bonus and gratuity—all of these and more were introduced by the group before any legal rules
were framed on them. To give but one example of how far ahead of the times the Tatas were—while their first provident-
fund scheme was started in 1920, the government regulation on this issue came into force in 1952.
These workplace measures were complemented by what Tata companies created to enable their employees to live fuller
lives away from their offices and factories, and to realize their vocational potential. The management-training programmes
conducted by dedicated group institutions are devised to help employees give expression to their talent. Driving every one
of the group’s initiatives in the wide sphere of employee relations is a value system that, slowly but surely, percolates to each
person looking to craft a career in the Tatas.
M07_SING6013_01_C07.indd 122 6/15/10 3:00:01 PM

From Industrial Relations
to Employee Relations
There is a gradual shift in focus at the enterprise level, from collective to the individual, from the containment
of conflict to the creation of enabling systems and structure that promote partnership, from “industrial rela-
tions” to “employee relations”.
Industrial relations (IR), as discussed in Chapter 1, refers to a collective relationship between

“employers” and “employees”, and is generally referred to as labour-management relations or
union-management relations. Industrial relations takes a collective approach and, therefore, deals
with relations between groups, and regards an organization as a collective unit managed by rep-
resentative officials who represent and deal with collective issues of workers/employees. Such
relations function at various levels of the concerned organization, dictated by the complex and
diverse needs, aspirations, attitudes and aptitude of both the employer(s) and the employees and
is regulated by the State. This signifies an inter-group/intra-group relationship spectrum based
on functional interdependence arising from industrial activity. Industrial relations are essentially
contingent upon the economic, political and social conditions within which the industrial unit
operates. On the other hand, the discipline of human resources management has addressed the
issues of “competitiveness” more often than those of industrial relations. Industrial relations, a
function, as it has been specifically described as such in the organization structure, has provided
employees with a collective voice and has ensured standardization in the terms and conditions of
employment in industries and nations as well.
In India, the politicization of trade unionism has made the State machinery focus on minimiza-
tion of employer–employee conflict through conciliation and arbitration and by exercising active
control over employers to prevent any action detrimental to the interest of the working class—
considered to be valuable “vote banks”.
With increasing competition and the process of globalization spreading its roots the world over,
most organizations have realized that competitive advantage can only be gained through people.
Strategic management of human resources requires leveraging skill, scale and technology. Leveraging
skill and scale demand a “capital” approach to the utilization of human resources that gives a “rate of
return”. Organizations today, therefore, prefer using the term “human capital” to “human resource”
to differentiate and inculcate the practice of gaining competitive advantage through people. The con-
cept and practice of industrial relations and its associated legislative and regulatory machinery are
claimed not to facilitate this process.
Over the years, the HR function has evolved itself into two distinctive roles—the operational
day-to-day activities required for the maintenance of human resources, and the strategic one for cre-
ating organizational capabilities and inventing new ways to gain sustainable and distinct competitive
advantage. The employees, on the other hand, are more knowledgeable and aware of their rights and
responsibilities and do not seem to require a collective forum to voice their concerns.
A paradigm shift indicating a radical change from the reactive or preventive industrial relations
approach to a proactive strategic employee relations approach is the new flavour, eroding the regula-
tory and legislative machinery for accommodating fresh demands and evolving equations between
the employer and the employee. It has also resulted in shifting focus from “employment contracts” to
“psychological contracts”.
M07_SING6013_01_C07.indd 123 6/15/10 3:00:02 PM

124 Part II Paradigm Shift
Drivers for the Shift in 7.1 A Shift in Focus

7
Focus
IIf the aim is to build a collective relationship through a regulatory mechanism between labour
Changing political
ideologies dictated by aand management instead of being restricted only to “industrial activity”, a more appropriate
concerns for economic tterm would be “employee relations”. This relationship can be between the employer(s) and a
growth ssingle employee, the employer(s) and a group of employees or even between the employee(s)
Trying to achieve aand more than one union. Strictly speaking, industrial relations, as a term, should concern
sustained competitive iitself only with collective relationship issues between employers and employees only in an
advantage through
iindustrial set up. Governments, educational institutions, autonomous bodies, etc. should,
people
ttherefore, not be within the purview of IR. IR also need not necessarily work towards con-
Changing characteris-
tics of workforce flict resolution; it can work towards building meaningful, collective partnerships instead.
Fast-paced changes This book aims to take a more strategic approach to relationship management with employ-
in technology reduc- eees, and hence, “industrial relations” is discussed with the primary thrust on the individual
ing dependence on ““employee” and the “employer”, keeping in mind the regulatory mechanism of the State.
industrial workforce The key shift in focus has been in perceptible narrowing down of areas of conflict and
The declining credibil- ggreater convergence towards efficiency and competitiveness. This requires collaborative
ity of unions
tteamwork and the least external interference of any kind. Political parties, at the same time,
ccould no longer ignore economic growth and development as the means of improving qual-
iity of work-life and life itself. This could only be achieved through the growth in industrial
activity in terms of quantity and quality. Quantitative approaches require leveraging econo-
mies of scale and technology. Qualitative improvements can only be made by leveraging
skill through people, which requires a unitary approach rather than a collective one.
Opening up of the markets and other liberalization measures have forced employers
to demand less rigidity/more flexibility in regulations, less standardization of the employ-
ment relationship, and a greater focus on individual aspirations and workplace efficiency.
Every function within an enterprise and every activity are now necessarily viewed to evaluate
the strategic contribution. In this context, IR must contribute to increase competitiveness
through ensuring cooperation, flexibility, adaptability, productivity, etc. Gaining competitive
advantage by shifting the focus on people is the new diktat.
With the growth in the service sector and the increasing pool of technically skilled work-
ers, the traditional concepts of “fair wages” and standard terms and conditions of employ-
ment for all are giving way to competence-based variable pay, outsourcing jobs and flexible
working options. With the growing aggressiveness of competition and increasingly consum-
erist ethics, the State’s interest in intervention in the name of maintaining harmonious indus-
trial relations has also reduced. In these circumstances, over-regulation, neither practical nor
advisable, has lost its relevance, as it only serves to reduce the flexibility employers require to
compete with the dynamics prevailing in the industry.
The advent of new technology and industrial automation has further reduced depen-
dency on industrial workforce. The relationship of man and machine is now associated with
the quantity and quality that it produces. A collective spirit that promotes quality conscious-
ness, and enhances productivity and customer satisfaction requires a participative model,
where not representatives of workers but each individual employee of the workforce engages
himself/herself in this mission. Principles and theories of motivation have gained prominence
in designing compensation packages tailored to suit individual needs, innovating exciting
individual and team incentives and introducing employee participation, involvement and
engagement through a variety of schemes and programmes.
The workforce composition has also undergone a transformation in terms of demography
and competence. The advent of an “informed” worker who is fully aware of his/her rights and
responsibilities has reduced dependency of any kind on a collective forum to represent or fight
for their cause. Further, an employee today is not looking for a long tenure in an organiza-
tion, but for career growth and development and, hence, is far more mobile than before. The
workforce is younger today, and at the same time, organizations are equally open to retaining
older employees, if their competence provides them a strategic advantage. The percentage of
female workforce has also increased, giving rise to a new set of gender-related issues that have
M07_SING6013_01_C07.indd 124 6/15/10 3:00:03 PM

From Industrial Relations to Employee Relations 125
been rarely taken up by the unionized workforce. The most important characteristic of the
The Employee–
workforce composition, however, is the fact that no employee looks for a long tenure in one Employer Relationship
organization, if it does not fulfil his/her aspirations. The concept of unionization and collectiv-
ism has, therefore, been replaced by an individualized concept, wherein each employee tries to Individualized
fend for himself. This has automatically put the focus of employee–employer relationship on Proactive
“individuals” and has ensured the retention of human capital competency in organizations. Development-oriented
rather than mainte-
The technological revolution and its impacts on the industrial landscape coupled with nance driven
the trade-union performance over the past couple of decades have led to the decline of trade Flexible rather than
unionism and its importance in India. Trade-union membership has reduced drastically, and standardized
the worker-interest in trade-union activities has also declined. The modern workplace is a Informal rather than
vital part of the modern economy and trade unions must, therefore, operate in ways that best institutionalized
reflect these modern practices. The organizations today have sought alternative ways of gain-
ing whatever advantages trade unions could provide them, through diversified channels of
communication, flexible policies and transparency in working and one-to-one dealings with
employees.
7.1.1 The Employee–Employer Relationship

The term “industrial relations” is a legacy of the “industrial revolution”. Labour, essen-
tially, was perceived as a factor of production by entrepreneurship. This resulted in an
informal and controlled relationship between the employer and the employees. Industrial
growth spearheaded the employment of a larger workforce characterized as “wage earners”.
Gradually, as research and literature threw light on the disturbing “hygiene” and other fac-
tors at the workplace, the relationship between the “workers” and the “employer” moved
beyond the private realm of an “employer–employee” relationship to the public domain
and became one of social concern. Maintaining industrial peace became the essence of
social welfare. Political ideologies emerged, and debates on the benefits and ills of a capital-
ist and socialist economy led to a struggle for power along with the voicing of the workers’
rights. This resulted in problems in industrial relations, which were manifested through
strikes, lockouts, retrenchments, etc. Industrial peace and its impact on public welfare led
to the emergence of trade unions and State regulations in order to ensure harmonious
“industrial relations”.
With globalization and the large-scale adoption of capitalist-driven growth models in
most countries, there has been a strategic shift away from “industrial relations” to “employee
relations”. This shift adopts a proactive rather than a reactive approach to the management of
employee relations. It encompasses all matters that arise in day-to-day associations between
employers, workers and managers. It, therefore, includes:
Relations between managers and individual workers
Collective relations between managers and workers
The role of the government in the regulation of these relationships
The shift towards employee relations implied that the traditional regulatory activities such Employee Relations
as monitoring compliance to legislative requirements, rules and procedures take a back seat, Employee relations
and such issues as employee selection, retention, performance management, employee com- may be defined as the
munication and involvement come to the forefront. Therefore, HRM function has reinvented relationship between the
itself from the traditional maintenance function to a strategic one, wherein human-resource employer or the repre-
sentative manager and
policies are devised to establish consistency with the “core values” of the organization. Earlier, the employees, aimed
changes were initiated by the strategic team at the top, and driven through change agents. towards building and
Today, the HRM function has taken upon itself a strategic role in change-management initia- maintaining commitment,
tives through communication and culture-building workshops, and preparing employees to morale and trust, so as to
cope with change. Developing relations with employees is now considered the right way to create a productive and
secure workplace environ-
build an organization culture, based on a foundation of common values among its employees. ment.
See Box 7.1.
M07_SING6013_01_C07.indd 125 6/15/10 3:00:03 PM


“Pfizer endeavours to develop a collaborative, constructive approach to deal with
grievances and differences of opinion between colleagues. The key thrust is on devel-
oping and maintaining a climate of openness, trust and mutual respect, and ensur-
ing the promotion of Pfizer values and the code of conduct in all aspects of business
behaviour.”
How do you think Pfizer can operationalize this statement? What effect should this
statement have on the trade-union organization in Pfizer, if it has one?
7.1.2 Why ERM?

The need for an employee-relationship management within the enterprise is a sine quo non
for every enterprise operating in a competitive environment. Although a cliché, this makes
sense. ERM is a strategy that aims to personalize employee relations. Converting the strat-
egy to ground-level execution is around which ERM, as a function, must be designed. An
ERM policy statement like the ones adopted by Pfizer and Sony facilitates the translation
of the strategic objectives to key areas and activities that lay the foundation of a productive
employee relationship.
Employee relations aim to produce successful, world-class organizations through
relationship-building with and amongst its employees. High-performing organizations
have a few common employee relations practices, but this being an inexact science at
best, a simple, do-it-yourself formula fitting all situations does not exist. There are
also clearly identifiable organizational issues that are responsible for productivity gaps.
Employee relations, therefore, tries to inculcate characteristics that render an organiza-
tion a success, and at the same time, proactively sensitizes itself to the organizational
issues that can retard productivity. It is a given that change is inevitable (and essential
for survival and growth), and employee relations management is increasingly geared
towards increasing productivity, returns and competitiveness. However, since people are
involved, it (ERM) needs sensitive handling, especially during times of technological
changes, market slump, cost-cutting and organizational restructuring. The ERM must
address procedural and interactional equity, which means “people” involvement in all
vital processes.
7.2 Employee Relations Management

Employee relations management (ERM) has a strategic focus, takes a proactive, long-term
view rather than the preventive and curative (in terms of settlement of conflict), short-term,
immediate solution that industrial relations is associated with. Employee-relationship man-
agement aims at building relationships, commitment and organizational loyalty, whereas
industrial relations resolves conflicts and prevents disputes in terms of maintaining relation-
ships, discipline and subordination. ERM works towards employee empowerment, while
industrial relations management talks of consultation and participation through systems and
committees. ERM is an informal, ongoing process that is beyond employee and employer
organizations and State regulations.
Industrial relations may have been perceived as necessitating the delicate handling in
view of the complexity of issues, but with the growing prosperity, increased wages, higher
standard of living, sophistication of work and mobility of workforce, organizations have
ceased to be owned by individuals and have become corporate enterprises. A new breed of a
progressive, yet status-dominated working class, with higher levels of individual aspirations
and lesser concerns for social equity now dominates the work-labour scenario. This calls
for the individualistic handling of employees and an appreciation of individual differences
and diversity in work values, beliefs, attitudes and levels of aptitude. Hence, ERM is what
M07_SING6013_01_C07.indd 126 6/15/10 3:00:03 PM

BOX 7.2 GOALS OF ERM

Establishing a link and congruency between employee contract and the employ-
ment relationship through a psychological commitment
Terms and conditions of employment to be based on the principle of fairness and
ensuring the organizational objectives as well as individual needs and aspirations
are fulfilled
Developing policies, procedures, rules and regulations that are fair, just and con-
form to the basic objectives and philosophy of labour legislation
Defining and clarifying performance-management expectations and standards to
enable employees to strategize and plan for the achievement of tasks and targets
set for their job positions
Developing effective communication channels and systems that ensure the infor-
mation needs of employees are met
would ensure progress, discipline and cohesiveness that are essential for industrial peace. In
contrast, industrial relations aim at ensuring industrial peace through discipline and good
relations with groups of employees.
Employee relations may, therefore, be defined as the relationship between the employer
or the representative manager and the employees aimed towards building and maintaining
commitment, morale and trust so as to create a productive and secure workplace environ-
ment (See Box 7.2). The regulatory role of the government in ERM has, thus, almost been
discounted. It is now contingent only upon the receipt of complaints and non-conformance
with prescribed mandatory legislations.
7.3 Industrial Relations and Employee

Relations: Differences in Perspectives
The differences in perspective, focus and strategy between industrial relations and employee
relations have been discussed under different heads in the following sections.
7.3.1 Influencing Factors

THE FACTO RS INF LUENC I NG I ND UST R I AL R E LAT I O NS
MANAG EM ENT
Economic Factors: These factors are determined by the structure of the economy—socialist,
capitalist or mixed. The demand and supply of labour, the nature and composition of work-
force, and the organization of labour would determine the economic status of the working
class and also the bargaining strength influencing industrial relations.
Institutional Factors: These factors include government policy, labour legislation, func-
tioning of labour courts/industrial tribunals, trade unions, and employers’ organiza-
tions. Social and religious institutions can also greatly influence the industrial-relations
scenario through a prevailing value system and by attempting to ensure conformance
to the same. This is exemplified by the gender bias observed in some countries and
industries.
Technological Factors: Techniques of production, automation, modernization, etc. are the
technological factors. Lesser the dependency on human capital, the lesser would be the bar-
gaining strength of employee organizations. Further advancement in “technowledge” and the
upgradation of competency profiles for jobs have also created a new class of workers termed
“knowledge workers” whose needs and aspirations are different.
Political Factors: The political system in the country, political parties and their ideolo-
gies constitute the political factors. The growth and strength of political parties and the
M07_SING6013_01_C07.indd 127 6/15/10 3:00:04 PM

methods used in formulating and implementing policies affect the industrial-relations cli-
mate. Furthermore, the involvement of trade unions in the formulation of policies also plays
an important role in tilting the balance towards the working class. However, if these parties
find themselves to be dependent on financial support from the corporate entities, the politi-
cal equation then would be completely different.
In countries where State capitalism is the main ideology, collective bargaining would not
be encouraged, trade unions would just be tolerated and labour-management relations would
be regulated with a fair degree of strictness.
In countries like the former USSR, where the prevailing political ideology is State social-
ism, trade unions are assigned well-defined roles and they function within the parameters of
the overall political system.
India having adopted a mixed economy, conciliation, arbitration, workers’ participation
in management, collective-bargaining are parts of labour-management relations.
Social and Cultural Factors: These factors refer to prevalent social norms, values and
beliefs. In countries like the USA, where a stable socio-political order exists, the govern-
ment promotes a common ideology of free enterprise, or democratic capitalism. In such
countries, “collective bargaining” is facilitated by legislation and government interven-
tion. In places such as the Scandinavian countries and the UK, where democratic social-
ism prevails, collective bargaining is the standard norm with almost no government
intervention.
T HE FAC TO R S I NF LUE NCI NG E M P LOYE E R E LAT I O N S

M AN AG E M E NT
Economic Factors: The pressure to compete in the global market with cost-effective qual-
ity products has put pressure on the employers’ organizations to extract performance and
ensure that the employees deliver. The focus has shifted from regulating terms and conditions
of employment to regulating performances. This has, at times, necessitated “downsizing”
according to the employees and “rightsizing” according to the employers. Subcontracting,
outsourcing and contractual forms of employment have replaced tenure employments. The
humanistic welfare concern of the employer is based on labour reciprocity through perfor-
mance and results. The employee–employer relationship is more unilateral than a collective
one. From dealing with groups of workers defined by craft, unit, or level, the employers now
talk of teams—self-managed or self-directed by the employees.
Further, the new wave of consumerism in the Indian society, a consequence of lib-
eralization and the opening up of the economy, has led to changing values among the
workforce, now more individualistic than collective. The emergence of MNCs has led to
new workplace arrangements. The price war in compensation is not based on equity but on
individual competencies and deliverance. The market forces have created a new employ-
ment arrangement and a new relationship between the employer and the employees—one
of mutual delivery on performance. This relationship is, thus, clearly distinct from the
“industrial relations” concept that had previously served to determine the work culture of
an organization.
Institutional/Governmental Factors: The new economic policy brought changes in legis-
lation relating to trade, finance and industrial policy while leaving the labour laws as they
were.
Indian labour laws are perceived to be pro-labour. Many labour laws and court judg-
ments are impediments to India’s competitive status in the global economy.
Labour unions in India are laden with problems of funds, external leadership, politi-
cal affiliations and multiplicity of unions with low membership and inter-union rivalry.
In the present market-driven economy, the trade unions have been moved from the cen-
tre to the periphery. In an environment where competitive advantage is gained through
cost-leadership, trade unions are viewed as excess baggage and a drain on resources. The
focus, therefore, is on building a relationship with the employee rather than with trade
unions.
M07_SING6013_01_C07.indd 128 6/15/10 3:00:04 PM

Social and Cultural Factors: In the post liberalization phase of economic growth, India has
promoted individualism, consumerism and a driving ambition among the working classes to
motivate its workforce to strive and move up the hierarchical ladder through performance
and the development of individual competencies. With greater opportunities, the possibili-
ties of labour mobility are far greater; attrition, too, is higher, which prefers a one-to-one
employee relations management more than a relationship favouring collective herding.
Commitment has become a unitary concept and has become of core essence to HR strate-
gies. This has made it difficult for workers to offer dual commitment to both the employer
and the trade union. The employers have broadened their roles to include and fulfil the roles
earlier performed by the unions. The employees, therefore, prefer to offer their commitment
to employers rather than to trade unions.
Technological Factors: New techniques and methods of work have changed work patterns
and descriptions of jobs. A new creed of skilled workers following new patterns of moti-
vation and aspiration levels has changed the character, scope and coverage of relationship
management.
Political Factors: These factors include the political system in support of the new economic
policy and its consequences. The communist parties have been repeatedly expressing their
concern over diversifications, mergers, acquisitions and the entry of foreign players in key
sectors of the economy. The resistance is manifested in trade unions affiliated to the commu-
nist ideology staging demonstrations against such government initiatives. In such a scenario,
dealing with the fears and insecurities of individual employees, rather than a participative
collective body such as a trade union, can play a more important role.
The factors influencing
Organizational Factors: The competitive environment has brought about a visible change employee relations
in the employment arrangement and new staffing practices. Flextime, outsourcing, con- management include:
tractual jobs are the order of the day. Staffing has become a profession rather than a func-
Economic
tion. Electronic processing has made personnel administration far easier, quicker and more
Institutional/govern-
responsive through e-HR. Even the one-to-one contact has become “virtual”. The focus once mental
again has shifted to the employee rather than employee groups. Social and cultural
Global Factors: The success stories of global corporations and Fortune 500 companies Technological
and their unique people-management programmes show a process of centralization of the Political
employee in the workspace. Diversity and individual differences are accepted and dealt with Organizational
carefully. This has greatly influenced the shift to employee relations management from a Global
strictly industrial-relations-management approach. Psychological
Psychological Factors: Especially in the present performance-driven culture that promises
no outstanding job security, psychological factors have a far greater role to play in ERM.
The role of coaching, counselling and mentoring has a greater role to play in ERM than they
ever did in industrial relations. HR strategies aim at motivating employees for excellence,
innovation and customer satisfaction. Psychological tools are more useful as they deal with
individual needs and aspirations and, hence, the focus shifts to the employee rather than to
any employee organization that claims representative roles.
7.3.2 Principles
THE P RINCIP L ES O F IND UST R I AL R E LAT I O NS M ANAG E M E NT
Rights and Obligations Under the Constitution of India: It is important that every employer
organization and its designated representative(s) recognize the individual employee’s right to
personal freedom and equal opportunity. Article 14 of the Constitution of India guarantees
certain fundamental rights to all Indian citizens. Further, the provisions in Articles 39, 41,
42 and 43 incorporate the elements of labour legislation and social security to the working
class. The judiciary, through its judgements, also ensures “social justice” ultimately aiming for
socio-economic equality.
The Acceptance of Mutual Responsibilities and Obligations: Accepting responsibility for
one’s action as an employee or an employer and its impact on the operations of the orga-
nization is the key to smooth industrial relations. The labour legislations, being in favour
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of labour, prescribe rights only for workers and obligations for employers. Recognizing the
constraints of such legislations, the National Commission of Labour recommended draft-
ing an Unfair Labour Practices document by both employees and employers and imposing
penalties for the same.
Seeking Mutual Understanding and Cooperation: Attempts at fostering mutual under-
standing between the employers and employees by gaining each other’s respect should be an
ongoing process that would lead to harmonious industrial relations.
The Establishment of Industrial Democracy: This can be achieved when labour has the
right to be associated with the running of an industry.
T HE P R I NCI P LE S O F E F F E CT I VE E M P LOYE E R E LATI O N S

M AN AG E M E NT The principles underlying the shift towards employee relations are:
The recognition of individual differences in needs and aspirations
Trusting the employees’ competence and the ability to perform and, thus, empower-
ing them
Providing support through coaching, counselling and mentoring
Facilitating individual development
Creating a collaborative work environment
Promoting a healthy work–life balance
A transparent and open communication system
Mutual trust and respect as a core value
7.3.3 Scope
T HE SCO P E O F I ND UST R I AL R E LAT I O NS Industrial relations deals with
the management of relationships, mainly with and within the groups or agencies as
mentioned below:
Employees: The relationship among/between employees and their superiors
Union–Management or Labour Relations: Collective relations between trade unions
and the management
Government–Management–Union: Collective relationship between various organi-
zations of employers and employees who represent the management, the workers and
the State
Community or Public Relations: The relations between an industry and the society.
This explains the importance of corporate social responsibility that most corporate
enterprises have initiated as a part of their work culture.
The subject matter of such relationships includes:
Desirable working conditions
The establishment and the maintenance of good personnel relations
Developing a sense of belonging by ensuring closer contact between persons from
various rungs of the industrial hierarchy
Developing a situation characterized by mutual concern and a sense of responsibility
for improved performance
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The maximization of social welfare

The maintenance of industrial peace and the avoidance of industrial disputes
THE SCO P E O F EM P LOY E E R E LAT I O NS The focus here shifts to perfor-

mance, growth and development for creating competitive advantage.
Employee Relations: The relationship among, and between employees and their
superiors
Group Relations: The relations between various groups of workmen and between
workmen of the same work groups
Community or Public Relations: The relations between an industry and the
society. This introduces the concept of organizational citizenship in partnering
social welfare and progress through the employees. In public-sector undertak-
ings in India, a lot of community-welfare programmes are initiated, which even
include joint celebrations of festivals, organizing sports events for children of the
employees.
Areas of the relationship include:
An improvement in working conditions
Effective administration of personnel policies
Maintaining good relations among employees
Creating a sense of belonging
Creating cohesive teams based on principles of collaboration
Creating a sense of mutual responsibility for improved performance and
productivity
Maximizing employee welfare and benefits
Improving employee morale and organizational pride
Employee development, empowerment and engagement
7.3.4 Objectives
THE O BJECT IV ES O F IND UST R I AL R E LAT I O NS
To promote and develop congenial labour-management relations
To maintain industrial peace and avoid industrial conflicts and disputes
To improve performance and productivity by minimizing losses on account of indus-
trial strife and conflict, manifested in the form of strikes, go-slows, etc.
To safeguard the interests of labour and management by securing the highest possible
level of mutual understanding and respect
To enhance the economic status of the worker by improving wages and benefits
To establish industrial democracy by strengthening employee partnerships
To ensure organizational discipline
To boost the morale of the workers and create a sense of organizational pride
To enable the workers to solve their problems through mutual negotiations and con-
sultations with the management
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To encourage and develop trade unions in order to increase the workers’ strength and
to institutionalize the process of collective bargaining
To correct imbalances in the socio-economic order arising out of industrial develop-
ment associated with complex social relationships and conflicting interests
T HE O BJ E CT I VE S O F E M P LOYE E R E LAT I O NS
To promote and develop good employee–employer relations
To minimize conflict at the workplace, at individual, inter-group/team and intra-group/
team levels
To improve the performance and the productivity of individuals and groups/teams
by a process of continuous value addition of human capital and reductions in cost
centres
To ensure smooth administration of the terms and conditions of employment and to
secure the highest possible level of mutual understanding and respect
To provide motivational incentives and benefits and enhance the economic status of
the workers
To establish democratic systems seeking employee partnership through employee-
empowerment and employee-engagement programmes
To ensure discipline at the workplace and establish a constructive and congenial work
culture
To boost the morale of the workers and create a sense of organizational pride
To reduce attrition of good performers
To enable workers to solve their problems through coaching, counselling and men-
torship programmes
To encourage and develop workers to engage in quality improvements, technical and
process innovations and brainstorming sessions for organizational excellence
To improve the quality of work-life, minimizing stress at workplace and facilitating a
healthy work–life balance for the enhancement in employee productivity
7.3.5 Preconditions
T HE C O ND I T I O NS F O R H E ALT H Y I ND UST R I AL R EL ATI O N S
The existence of a strong, well-organized democratic employees’ union. This would
provide bargaining power to negotiate and protect employee interests in terms of
wages, benefits, job and social security.
The existence of employers’ associations to facilitate the promotion of uniform per-
sonnel policies and to initiate requisite reforms in labour legislation that would pro-
mote economic wellbeing
The practice of collective bargaining through process consultations and negotia-
tions between the employee organizations or trade unions and the employers’ orga-
nizations. If issues still remain unresolved, even through consultative discussions
and negotiations, they could then be referred for voluntary arbitration instead
of resorting to adjudication in order to maintain intra-industrial harmony and
congeniality.
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THE CO ND IT IO NS F O R H E ALT H Y E M P LOYE E R E LAT I O NS

The incorporation of democratic principles as an essential core of the work ethic
The promotion of collaborative group interactions through work systems, norms,
rituals and informal social interaction
The institutionalization of work culture through practices that promote the core val-
ues of the company
Communications, both formal and informal, which must be open and transparent in
nature
7.3.6 Measures
THE MEASURES FOR EFFECTIVE INDUSTRIAL RELATIONS The pre-
ventive measures taken to promote industrial peace are discussed in detail in Chapter 15,
and they include the following:
Labour welfare
Joint consultative bipartite and tripartite bodies such as the Industrial Labour
Conference (ILC) and Standing Labour Committee (SLC)
Standing orders
Grievance redress procedure
Code of Discipline
Wage policy and regulation machinery
Schemes of workers’ participation in management
Collective bargaining
Code of conduct and rules
Workers’ participation in rule-framing
Strengthening employees’ organizations
Apart from the above, the Industrial Disputes Act, 1947, has provided for a machinery for
the settlement of disputes between groups so that industrial peace is not threatened. We will
discuss this in detail in the later part of this book.
THE M EASURES F O R P R O M OT I NG E M P LOYE E R E LAT I O NS The

measures to develop employee relations are as follows:
Employee-engagement programmes, such as the Employee Stock Options (ESOPs),
gain-sharing and profit-sharing schemes
Employee-empowerment by facilitating employees to take on a key role in decision
making
Employee-involvement programmes like suggestion schemes
Facilitating employee participation through a formation of joint working committees
in areas like safety, quality, employee welfare, etc.
Multi-level communication channels and new communication methods and systems
Self-learning opportunities about company products, services and customers in a
single, personalized and easily accessible enterprise portal
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7.3.7 Linkage Human Resource Management

Human resources management entails the design of formal systems in an organization to
ensure an effective and efficient use of human talent to accomplish organizational goals. The
field of “man management”, as it used to be called earlier, has also undergone changes from
being regarded simply as personnel management to HRM. The shift from Taylor’s theory of
“scientific management” to “hygiene” factors affecting motivation and morale of employees
emphasizing on a human approach to work design ushered in one phase of change. With
globalization and an increasingly competitive environment becoming a given, the industrial
world has seen another shift from a purely human-relations approach to an attempt at the
management of human resources. This shift is primarily responsible for the thrust of change
from industrial relations to employee relations. The primary causes associated with this shift
are as follows:
The realization that a happy worker is a hard worker is an oversimplification of
reality
The human-relations approach did not take care of individual differences
The industrial relations management did not recognize the need for a job structure,
performance parameters and performance-behaviour standards
The human-relations approach did not explore other motivational tools, such as per-
formance appraisals and career development, and merely concentrated on developing
human relations as a collective group entity
The current approach is a human-resource approach, where employees are treated as
investments and the emphasis is on policies, programmes and practices leading to a pro-
ductive work environment. The new concept of human-resources-management function
is one that facilitates the most effective use of the human resource or human capital, to
achieve organizational excellence. This entails the following functions with regard to
human resources:
Acquisition
Coordination
Maintenance
Motivation
Development
Retention
The role of relationship management holds a special significance in terms of increas-
ing per capita income, improving the human development index and, thereby, uphold-
ing national growth and interest. This macro-perspective is better managed through the
operative function of employee relations than through the managerial function of indus-
trial relations.
The current issues and challenges of human resources management such as downsizing,
restructuring, productivity and quality improvements, technological innovation and knowl-
edge management can be solved when an employee-relations-management approach is used
instead of the industrial-relations-management approach.
7.3.8 Line or Staff Function

Industrial relations management has been viewed as a specialized function requiring
knowledge of labour laws, its application and interpretations. The management of statu-
tory and non-statutory welfare activities; the management of social-security programmes
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and schemes like gratuity and provident fund; the management of conflicts, grievance-
handling and bipartite committees under the scheme of workers’ participation fall within
the ambit of activities assigned to an industrial relations officer/manager. The maintenance
of health and safety, canteen, welfare amenities, communication and counselling, too, are
activities that are part of industrial relations management. Therefore, even though direct
dealing with people has always been considered to be an integral part of every line manag-
er’s responsibility, specialized assistance of a staff support is provided for handling indus-
trial relations.
Employee relations, on the other hand, refer to the direct communication with employ-
ees on a day-to-day basis. The administration of the terms and conditions of employment is
serviced by the HR department. Therefore, ERM is the responsibility of both line and staff
functions. However, that only a small part of employee relations management is adminis-
trative needs to be appreciated. The majority of the activities are related to the formulation
BOX 7.3 THE JOB DESCRIPTION OF A MANAGER (INDUSTRIAL RELATIONS)
Designing new employee-related policies

Establishing and maintaining good relationships with the trade unions
Acting as a consultant to line managers on the implementation of policies
Assisting in the resolution of specific disciplinary or grievance cases, including act-
ing as an arbiter between the employee and the line manager
Carrying out formal consultation procedures on a variety of issues as required
by law
Advising others on the proper procedures for carrying out negotiations and on the
special regulations relating to employment and salary agreements
Negotiating with trade unions on issues relating to pay and working conditions
Providing accurate advice on issues arising from employment contracts and
legislation
Preparing staff handbooks to ensure that the workforce is aware of company policies
Ensuring that grievance-handling and disciplinary proceedings are carried out in
line with company policies and national legislation
The Job Description of a Manager (Employee Relations)*
Interviewing workers to gather information on worker attitudes towards work envi-
ronment, to facilitate resolution of employee relations problems
Explaining to the workers the company and governmental rules, regulations, and
procedures, and the need for compliance
Gathering information on the workers’ feelings about the factors that affect worker
morale, motivation, and efficiency
Meetings with line managers to discuss possible actions to be taken
Inspecting work stations to ensure required changes or actions are implemented
Interviewing workers to determine reactions to specific actions taken
Preparing reports on the workers’ comments and the actions taken
Enrolling eligible workers in company programmes, such as pension and savings
plans
Maintaining medical, insurance, and other personnel records and forms. May oper-
ate computer to compile, store, or retrieve worker-related information, such as medi-
cal, insurance, pension, and savings plans
Adapted from http://www.careerplanner.com/DOT-Job-Descriptions/EMPLOYEE-RELATIONS
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of policies, systems and taking a proactive role in the prevention of workers’ conflicts and
grievances. Thus, the ER manager finds himself playing a strategic and innovative role unlike
an IR manager, who deals with unions only. The employee relations manager deals with all
employees and also with the external environment in a manner that helps to create a brand
image for the organization as a model employer, which, in turn, attracts the best talent to the
organization.
7.3.9 The Role of an HR Manager

Industrial relations management had a consultative and executive role, whereas
employee relations management has a facilitative and service role. This shift makes
the HR professionals strategic partners in business growth and development. From a
staff function, HR needs to take a developmental perspective towards its role, creat-
ing desirable changes and initiating interventions to improve the performance of the
employees. A sample job description of a manager designated as Manager (IR) and
Manager (ER) shown in Box 7.3, explains the difference in the work design of these two
HR specialists. It must be noted that employee relations is an approach, still in transi-
tion and, therefore, there would be many overlaps between the two functions. Rather
than being distinctly different from each other, the two should be seen as a movement
along a spectrum.
Compare the two job descriptions and note the change in competency profile in terms of
knowledge, skill and attitude. Industrial relations managers need to have a strong knowledge
base of labour legislations, whereas an employee relations manager has to have requisite skills
in building sound relationships at work.
SUMMARY
The term “employee relations” was conceived as in employee involvement, participation, engagement and
a replacement for the term “industrial relations”. empowerment programmes to get the best return from
“Industrial relations” is generally understood to refer to human capital.
the relationship between the employers and the employ-
Sound employee relations would be based on:
ees, collectively.
䊊 Effective mechanisms at all levels in the organization
“Employee relations” broadens the study of industrial
relations to include wider aspects of the employment 䊊 Enlisting participation of the employees
relationship, including non-unionized workplaces, per-
䊊 Ensuring safe and effective work environment
sonal contracts and psychological, rather than contractual
arrangements. 䊊 Eliciting commitment and motivation of all staff
Employee-relationship management is at the forefront of The emphasis and shift are in the following:
HRM scene.
䊊 From collective institutions such as trade unions and
Good employee relations not only help reduce absenteeism collective bargaining, to the relationship with individual
and attrition, and avoid costly disputes while harnessing employees
goodwill, but also facilitate in enhancing performance, pro-
䊊 From “employment contract” to “psychological contract”
ductivity, effectiveness and commitment.
䊊 Competency development attempted through employee
ERM focuses on a comprehensive merger of corporate, man-
involvement, engagement and empowerment
agement and employee needs to increase efficiency, produc-
programmes
tivity and profitability.
䊊 Strategic rather than the preventive maintenance concept
ERM takes into consideration the dynamics of the envi-
of industrial relations
ronment and draws upon innovative and best practices
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KEY TERMS
employee empowerment 126 employee participation 124 industrial relations 123
employee engagement 137 employee relations 123 psychological contract 123
employee involvement 136 human capital 123
REVIEW QUESTIONS
1 Differentiate between the following terms: 3 What do you understand by the terms “employee involve-
ment”, “employee engagement”, “employee empowerment”
i. Industrial relations and employee relations
and “employee participation”? Explain with examples.
ii. Human relations management and employee relations
4 Discuss the major differences in scope and coverage of
management
“industrial relations” and “employee relations”.
iii. Employee involvement and employee participation
5 Is ER a line function or an exclusive HR function?
iv. Employee empowerment and employee engagement
6 How can ER be built in service organizations spread
v. Human resource and human capital globally?
2 Do you think there should be a separate section dealing exclu-

sively with ER within the HR department? Why or why not?

1 Discuss the changing dynamics of the industrial rela- 3 Organizations are constituted by individuals hired to per-
tions scenario in India brought about by the globaliza- form certain tasks and key responsibilities with roles struc-
tion and liberalization of the economy. Has it resulted tured to be part of a working group or team. Relationship
in any paradigm shifts in the management of human management aims to govern relationships among individual
resources? If yes, what are the challenges ahead for HR employees as well as between groups. How can this relation-
professionals? ship be developed and maintained?
2 In the light of the challenges brought about by globaliza- 4 The management of industrial relations has slowly undergone a
tion, the introduction of new technology, methods and metamorphosis. Explain with special reference to the scenario
processes, has the employee–employer relationship changed after the economic liberalization and globalization in India.
completely? If so, describe these changes and their impact on Has the employee–employer relationship changed completely?
organizations. If so, describe these changes and their impact on organizations.
D E B AT E
Read the following extract, which gives the practical reality of Over a year thereafter, the young HR professional realizes
employee relations, and then debate on the issues. he has spent more time in front of his PC than with the
“people” he had dreamt of. In the age of “mentafacturing”
THE scene is an aspiring human relations (HR) profession-
and “manufacturing”, front-line services, professional ser-
al’s campus interview. The first question asked is “So, why
vices and technology services, human capital and intellectual
did you choose HR?” Pat comes the reply, “I love interacting
and being with people.”
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capital, on-site and offsite work, temping and contracting, ER from their agenda rather than make it an integral part of
who manages Employee Relations (ER)? their work?
In the preoccupation with process and performance, has Source: Ganesh Chella, “Employee Relations—Why
there been a compromise on “relationships”? In trying to It Should Be Kept Alive”, www.thehindubusinessline.
share the responsibility, have both the line manager and the com/2003/12/09. (Ganesh Chella is the founder and CEO of
HR manager let employee relations die a slow death? In the Totus consulting.)
eagerness to shape strategy, have HR professionals dropped
Case 1: Team or Union—Who Has the Greater Potential to circles. A gradual process of alienation from the company
Influence? seeped in. In fact, even the one quality circle that was operat-
ing effectively was forced by peer pressure from union mem-
Patil was all excited when he was given permission by the
bers to close down.
General Manager to implement a quality circle in one of the
units he supervised. In the beginning, the employees were very Where did Mr Patil go wrong as regards employee relations
sceptical, and only a few volunteered for the training. Patil was management?
well versed with the concept and he sincerely believed that it
Case 2 “We Are Shifting the Office”
was exactly what would keep the workers interested and moti-
vated to generate a better-quality product. Amtec Ltd. designed process and control systems software for
the automobile sector. They started as a small group of eight
In the first round of discussions, during the training pro-
employees designing software for one automobile com-
gramme, the circle members came up with some very useful
pany. Within a span of 5 years, they had 34 employees and
suggestions, one of these suggestions resulted in a drastic
8 major automobile companies as their clients. The initial
improvement in the reject rate. The work atmosphere in this
start-up was from the basement of Mr Khemka, the owner’s
unit was all charged up and the absenteeism rate among the
residence. On the New-Year’s-eve company gathering, Mr
quality-circle members dropped by 40 per cent.
Khemka announced that the office would shift to Gurgaon
Enthused by the initial success, Patil decided to publicize from February. He gave details of the office space interiors
it in the in-house journal of the company. Word spread and other improvised welfare facilities that would be avail-
around and other unit managers showed interest in under- able to employees at the new site. He also declared that
standing the process, and they started emulating it in their transport arrangements would be worked out for employ-
units. Patil was asked to prepare a report on the process ees, but also advised them to consider shifting residence to
and its evaluation. The General Manager toyed with the Gurgaon.
idea of spearheading 10 more voluntary initiatives for qual-
Though some employees had some inkling of the shifting of
ity circles. This information had spread across the plant. The
the office, but the location and other details were not known
President of the union also sought the report prepared by
to anyone. There was an uproar, and what should have been
Patil. His first reaction was “What the hell is the manage-
an exciting proposition turned into a major issue of concern
ment up to this time?”
for all. Precious time was lost in raising demands, queries and
By the next morning, all union members were told that qual- concerns—both individual and collective. The shifting of the
ity circles were just one more attempt by the management to office had to be eventually postponed, pending discussions
extract more work from them with no additional compensa- with the “representatives of employees”, who were nominated
tion. To support this, the President of the union distributed through a signature campaign.
copies of articles that stated that quality circles were a tech-
Discuss the genesis of the problem from both IR and ER
nique for enhancing the productivity of the workers. The net
perspectives, and suggest what should have been done.
result was a gradual withdrawal of participation in quality
M07_SING6013_01_C07.indd 138 6/15/10 3:00:06 PM

SUGGESTED READING
Howard, A. The Changing Nature of Work (San Francisco: Jossey- Dayal, Ishwar “HRD in Indian Organizations: Current
Bass, 1995). Perspectives and Future Issues”, Vikalpa, IIM Ahmedabad,
October–December 1989.
Virmani, B. R. “Redefining Industrial Relations”, Indian Journal of
Industrial Relations, October 1996. de Silva, Sriyan “Employers’ Organizations in Asia-Pacific in the
Twenty-First Century”, paper presented at the ILO Workshop
Lawler, E. E. The Ultimate Advantage: Building a High Involvement
on Employers’ Organizations in Asia-Pacific in the Twenty-First
Organization (San Francisco: Jossey-Bass, 1992).
Century, Turin, Italy, 5–13 May 1997.
ILO, “Towards Fair Globalization: Report of the World
Commission on Social Dimensions of Globalization”, 2004.
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chapter eight
8.1 Employee Relations in a Strategic After reading this chapter, you will be able to:
Framework • Understand the employee relations
8.2 Employee Relations at the Workplace imperative in the changed business
8.3 Culture and Employee Relations environment and context
8.4 The Future of Employee Relations • Understand the role of employee relations
in the larger strategic framework
• Think of practical approaches to the design
and the implementation of systems and
processes from an ER perspective
“You Can Never, Ever, Do Enough for Your People”1
FedEx was started in April 1973 by Fred Smith. FedEx is the world’s largest express transportation company with more than
145,000 employees worldwide, delivering more than 3.2 million packages daily. They command a fleet of 634 aircrafts and
more than 42,500 vehicles. They log more than 2.7 million miles each day on the ground. FedEx’s revenues in 2008 were
more than 37 billion USD.
FedEx has maintained its profitable commitment to excellence by applying 11 management principles. One of these eleven
principles underlies FedEx’s unparalleled success—you can never, ever, do enough for your people. Here is how this man-
agement principle operates at the grass roots in FedEx.
The rights and value of a single human life have become the central focus of social evolution in the industrialized
world . . . FedEx, from its inception, has put its people first both because it is right to do so and because it is good
business as well. (FedEx manager’s training guide).
Fred Smith, the CEO of FedEx, put people first, knowing that service and profits would follow. The flat management structure
minimizes the distance between leaders and the front-line workers, empowering employees and expanding their respon-
sibilities. While there can be no honest unconditional commitment to a no lay-off policy, what FedEx has done is to make
a commitment to reasonable employment security by cross-training employees for more flexibility and allowing for the
redistribution of work during slow periods. Thoughtful and imaginative compensation schemes are at the heart of FedEx’s
human resources policies. FedEx may provide flexible work hours, leave of absence for family emergencies, and permanent
part-time work. Benefit packages are also structured to accommodate age, health, career paths, and other personal prefer-
ences. Individual bonuses and awards are tailored towards individual preferences and not bestowed indiscriminately.
FedEx has a policy of promotion from within, a procedure for resolving employee grievances that can result in the problem
ultimately being reviewed by the CEO, executive vice-president, chief personnel officer, and two senior vice-presidents.
Open communication plays such an important part in FedEx that they have set up their own internal broadcasting com-
pany, FXTV—their internal CNN which reports on everything from inclement weather, company goals, the previous night’s
service levels, what the competition is up to, and candid call-in programmes.
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Employee Relations
Management at Work
Employee relations is concerned with maintaining employer–employee relationships that contribute to satisfac-
tory productivity, motivation and morale. Essentially, employee relations is concerned with preventing and
resolving problems involving individuals, which arise out of or affect work situations.
In 2008, FedEx appeared on the 97th position on Fortune’s list of top 100 “Best Companies to Work
For”. In fact, it has consistently found a place in this list over the years. What do we make out of FedEx
way with people? FedEx must be complying with the numerous legislations concerning employees,
yet in the opening passages, it appears that compliance issues must be redundant with FedEx hav-
ing risen much above mere compliance and maintenance of relationships with groups of employ-
ees. There seems to be a real concern for individual employees, work groups and performance. The
industrial relations approach, i.e., managing the employee collective does not seem to be critical to
organizational processes at FedEx. It is something else.
The “management principles” of FedEx, as mentioned in the chapter-opening case, have shaped
the employee relations approach at FedEx. It certainly has influenced the business performance of
FedEx. There is a definite focus on individuals while shaping the larger “people policy”; definitely
not a “one shoe fit all” mind-set that one associates with “rule making” for a collective. The primary
relationship at the workplace is between the employer and an individual employee. The relationships
between the employer/management and groups or unions are all secondary relationships, derived
from the primary.
“Employee relations” (ER), in its original form, was a generic term used to describe the system
by which workplace activities were regulated, the arrangement by which the owners, managers and
staff of organizations came together to engage in productive activity. It concerned setting standards
and promoting consensus for achieving objectives.
The genesis lies in the economic and social changes of the industrial revolutions and the urban-
ization of the nineteenth century, the inherent conflict between labour and the owners of the firms,
the formation of collectives (combinations of groups of workers to look after their own interests)
and the demarcation lines and restrictive practices that some occupations and trades were able to
build up. The influence of these traditions remains extremely strong, particularly in long-established
industries such as factory work, transport and mining.
However, recent years have seen a transformation in the way businesses are carried out and also
a complete transformation of the context in which businesses are carried out. There is a felt need
for a departure from the “control” and “direct” mode of managing employees, and many organiza-
tions have responded to this need worldwide. Direct engagement with the employee and seeking his
wholehearted involvement with the objectives of the organization is the only means now visible to
build lasting competitive advantage. This is at the core of the transition that we are witnessing and
which loosely is termed as “employee relations”. The reasons for this shift have been discussed in pre-
vious chapters, but globalization, fierce competition, fast-paced technological changes, demography
of the working population are only few of the forces that are shaping the shift. The main actors of the
employment equation, i.e., the employer, the unions and the State are all feeling the need to readjust
and reorient their perspectives. A serious attempt to change and to generate a more positive and har-
monious ethos is visible, although there are variations between the three players’ levels of seriousness,
M08_SING6013_01_C08.indd 141 6/15/10 3:01:32 PM

efforts and response. Companies and their managers have come to recognize the importance
of positive employee relations and the contribution that they make to profitable and effective
performance. Given the high attrition rates in knowledge and service sectors, “employees rela-
tions” is now taking a predominant and objective role. Further, when the collectivist approach
of dealing with employee organizations/trade unions is resorted to, the balance of bargaining
power is affected by the economic, legal and technological environments. It would still not
motivate people to create high-performance teams, if their individual needs and aspirations
are not addressed. At the workplace, this is translating into:
Large-scale changes in people-related strategies and processes
Human resources management and development becoming an area of strategic
concern
The recognition that core-competence-building and the design of the organization
are key differentiators and the sources of competitive advantage
The motivation of the employees for higher productivity, problem-solving and cre-
ativity is a necessity for which the “direct” and “control” model of management is
grossly inadequate and the only way ahead is to get commitment and cooperation
from the employees.
Trade unions have to look beyond the economic demands and the organized sectors
(the organized sectors seem to have outgrown the need of union intervention for
economic demands anyway), and focus on larger economic and social issues.
The government must strive to be more nimble in responding to the changes, and at
the same time, protect the interests of all concerned in the productive endeavour.
8.1 Employee Relations in a Strategic

Framework
The strategy of an organization refers to “a specific pattern of decisions and actions that
managers take to use competences to achieve a competitive advantage and outperform
competitors.”2 In this context, employee relations may be thought of as a common layer that
animates the related fields of HRD, HRM and industrial relations. It is that software that
tints every action in these functional areas so as to gain employee commitment for enhanced
performance. It is that difficult-to-define body of actions, attitudes, systems, policies and pro-
cesses, which induce competence-building. And since the building of core competence is at
the core of a company’s strategy, an employee relations approach assumes critical importance
in the overall strategic objectives.
As we have read in the previous chapters, employee relations have evolved through dif-
ferent perspectives at different times, and these perspectives would impact strategic intent
and fulfilment differently.
UNI TAR I SM . This assumes that the objectives of all involved are the same or com-
patible, and concerned only with the well-being of the organization and its products,
services, clients and customers. The most successful of unitary organizations such as
McDonald’s and Virgin set very well-defined and distinctive work, performance and per-
sonal standards, to which anyone working in the company must conform. This is apparent
in a few Japanese companies as far as the management of human resources is concerned.
With a unitary approach, clear and unambiguous strategies may be considered the salient
elements.
M IS SI O N. The mission maybe considered to be reflecting and summarizing the pur-

pose of the organization, and its ways of working, in a clear and unambiguous manner.
M08_SING6013_01_C08.indd 142 6/15/10 3:01:32 PM

Employee Relations Management at Work 143
TERM S AND CO ND IT IO NS. These are based on adequate and stable wage
levels, fairness and equality of work practice, managerial openness and transparency, uni-
versal access to information, regular high-quality consultation, integrity of operations and
activities.
CO RE VALUES (REF L EC T I NG E XP E C T E D BE H AVI O UR AND

ATT IT UD ES). The core value of employee relations is positiveness in attitude, with the
view to create harmony and remove the causes of conflict, by adopting high moral and ethical
standards of fairness, equality, respect, value and esteem.
CULT URE -INT EREST AND C O M M I T M E NT. These involve strategies for
generating identity, loyalty and a mutuality of interest.
WO RK CO M P O SIT IO N. This would mean including the ability of everyone to

progress and achieve their potential, acknowledging limitations in work division and occu-
pational definitions, giving a universality of the principle of opportunity.
PLURAL ISM . This admits to a variety of objectives, not all compatible, among the
staff. In view of the existing conflict, rules, procedures and systems are established to man-
age dissent and limit its influence as far as possible. This is the approach taken especially in
public services, the local government and many industrial and commercial activities, where
diverse interests have to be reconciled to in order that productive work may take place. In
the pluralist perspective, a divergence of loyalties, commitments, ambitions and expectations There are three perspec-
is admitted. This means knowing and understanding what these are and why they exist. The tives that could determine
the employer–employee
pluralist perspective, consequently, recognizes the inherent nature of the conflict between relationship:
different groups of staff, between functions, and within groups of staff. It also admits divided
loyalties—an individual, for example, may have professional, occupational, work-group, Unitarism
trade-union or professional-body loyalties as well as those to their organization. Very often, Pluralism
this is reinforced where there has been a strong trade-union presence, a recent history of Radicalism
conflict of objectives, or where the profession exerts a strong influence on work standards
and practices.
RAD ICAL ISM . This is the view that commercial and industrial harmony is impos-
sible until the staff control the means of production, and benefit from the generation of
wealth. Until very recently, this was the cornerstone of the philosophy of many trade
unions and socialist activists in industry. The radical perspective arises from the Marx-
ist premise that efficient and effective industrial activity could only be successful if the
workers owned and controlled the means of production. This could be facilitated by the
following ways:
The promotion of employee-share-ownership schemes and profit-related pay schemes
take the point of view that giving the employee this form of stake in the organiza-
tion helps to gain a positive mutual identity, and that the employee’s commitment is
gained because they themselves share the risks and rewards.
The promotion of the partnership concept
Setting standards to which people are required to conform
ER strategies are also influenced by the nature of the enterprise—whether it is the public or
the government that is serviced; especially, there could be variations along a continuum on
the following dimensions:
C O N F L I C T. Conflicts in an organization can arise because of mistrust, divergence,

irreconcilable aims and objectives; disparity of location; divergence and complexity of
M08_SING6013_01_C08.indd 143 6/15/10 3:01:32 PM

patterns of employment and occupations; and differences amongst professional, techni-

cal, skilled and unskilled staff.
C O N F O R M I T Y. The diversity of staff and technology may be (and often is) as

great as in the above scenario, but where the ER strategy sets standards of behavioural
and operational norms aimed at requiring the different groups to rise above their inher-
ent differences.
CO NSE NSUS. The way of working is devised as a genuine partnership between the
organization and its staff and their representatives. Genuine consensus or partnership is very
rare. Discuss the story of the Brazilian company given in Box 8.1.
8.2 Employee Relations at the Workplace

Employee relations can be visualized as that common factor that orients the HR, IR and
development functions towards building of competence within the organization. All
tradeoffs within these functions and between players must be decided in long-term competi-
tive advantage. Every function, system, policies and process would be geared towards elicit-
ing full participation, cooperation and commitment to the achievement of the advantage. It
discards the long-held belief that the management has the divine right to know “the one right
answer” and that all wisdom rests with the management who needs to “direct” and “control”
the employees.
8.2.1 Principles, Structures, Functions, Policies

and Processes
The activities that are associated with the ER function are the following:
The evolution of core values that determine the organization culture, attitudes and
values, and also specify the standards of ethics, behaviour and attitude
Standards of performance and the management of performance including compe-
tence development
Organizational design
Range of employee relations activity
Organizational and managerial approaches to employee-management organizations
and managerial approaches to the management of disputes, grievances, discipline
and dismissal
Procedures for the management of disputes, grievances and discipline
Consultation, participation and communication structures
Workplace climate
P RIN CI P LE S
The Equity Concept: This concept is based on an ethical stance that all employees should
be treated equally, and that the same fundamental terms and conditions of employment are
to apply to all. This implies a single staff handbook applying to all, where the terms and
conditions of employment are uniform. The participation in profit-sharing and gain-sharing
schemes would involve everyone.
Behavioural issues reinforce this concept of equality. Everyone is addressed in the
same manner regardless of occupation. The work of each employee is valued and respected.
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Industrial Democracy at Work
Ricardo Semler is the CEO and majority owner of Semco SA, a Brazilian company. Semler
is best known for his convictions on industrial democracy and a miraculous turnaround of
his company. His radical management style has generated widespread interest amongst
management practitioners as well as academicians. Here is an excerpt from an article
about Ricardo Semler and SEMCO:
“To see Semco’s approach in action, just visit the company’s pump plant on the
outskirts of Sao Paulo. This operation bears about as much resemblance to a traditional
factory as the rainbow hues of its walls—the choice of the employees—do to industrial
gray. Forget about foremen barking out orders to passive people. On any given day, a
lathe operator may himself decide to run a grinder or drive a forklift, depending on what
needs to be done. João Vendramin Neto, who oversees Semco’s manufacturing, explains
that the workers know the organization’s objectives and they use common sense to decide
for themselves what they should do to hit those goals. ‘There’s no covering your ass,’ says
Mr Neto. ‘The intent is to get straight to specific targets.’”
Semco’s 3,000 employees set their own work hours and pay levels. Subordinates hire
and review their supervisors. Hammocks are scattered about the grounds for afternoon
naps, and employees are encouraged to spend Monday morning at the beach if they
spent Saturday afternoon at the office. There are no organization charts, no five-year
plans, no corporate values statement, no dress code, and no written rules or policy state-
ments beyond a brief Survival Manual in comic-book form that introduces new hires to
Semco’s unusual ways. The employees elect the corporate leadership and initiate most
of Semco’s moves into new businesses and out of old ones. Of the 3,000 votes at the
company, Ricardo Semler has just one.
In Mr Semler’s mind, such self-governance is not some soft-hearted form of altruism,
but rather the best way to build an organization that is flexible and resilient enough to
flourish in turbulent times. He argues that this model enabled Semco to survive not only his
own near-death experience, but also the gyrations of Brazil’s tortured politics and twisted
economy. During his 23-year tenure, the country’s leadership has swung from right-wing
dictators to the current left-wing populists, and its economy has spun from rapid growth to
deep recession. Brazilian banks have failed and countless companies have collapsed, but
Semco lives on.
The ultimate hands-off leader, Mr Semler doesn’t even keep an office at Semco.
“Here’s why: Our people have a lot of instruments at their disposal to change directions
very quickly, to close things and open new things.” Flexibility is the key, he says. “If we said
there’s only one way to do things around here and tried to indoctrinate people, would we
be growing this steadily? I don’t think so.”
Those four words, “I don’t think so,” delivered with a Brazilian Portuguese lilt, rep-
resent Mr Semler’s standard answer to corporate dogma, assertions that something he
wants to do cannot be done, and even overly doctrinaire interpretations of the participative
management concept. Mr Semler is not a particularly self-effacing or humble advocate
of human potential; his assurance in argument is legendary. In conversation, in teach-
ing, and in his books Maverick and The Seven-Day Weekend, he puts forth participative
management as not just a pragmatic path to business success, but also a healthy and
enjoyable way of life.”
What kind of approach is Semco following? Do you think such approach is sustain-
able in the long run? Or is it just some kind of gimmick?
Source: Excerpt from Lawrence M. Fisher, “Ricardo Semler Won’t Take Control”, www.strategy-
business.com/press.
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Differentiation between groups and categories of employees is on the basis of work function
only; there are no exclusive canteens, or car-parking spaces.
The Flexibility Concept: Related to single status is the concept of the “flexible workforce”,
where everyone concerned is both trained and available for any work that the organization
may require of them. The employees would be oriented to this philosophy when they join the
organization. This is a fundamental departure from traditional specialization, demarcation
and restrictive practices. Implicit in this are obligations on the part of the employees to accept
continuous training and development as part of their commitment to the organization.
The Extent of the Workers’ Participation in Management: The extent of participation of
the employees in the management of an enterprise is also a matter of principle that sets the
tone for an approach to employee relations. Many organizations have established workers’
councils in recent years. In India, the Scheme of Workers’ Participation in Management even
provides for having on the board of directors a representative looking after the employee
interests. This will be dealt with in detail in the subsequent chapters.
ST R UC T UR E . We assume that considering the business and contextual imperatives,

organizations will surely transit from a collectivist approach to an individual approach to the
management of employees. In essence, this means that the basic approach would gradually
shift
s towards employee relations, maybe at a pace dictated by the different pressures on differ-
The ER staff must form ent
e industries and establishments. However, there would remain common threads in estab-
an identity with the lishing
l functional linkages with other departments. Organizations must appreciate the nature
organization.
and
a strengths of the types of staff that they employ in ER/IR departments. They must recognize
Boundaries of perfor-
mance and behaviour that
t there are divergences of aims, and different priorities that must be resolved if effective and
requirements must be profi
p table work is to take place. The nature of ER and related staff-management activities will
established. vary
v accordingly, but at the outset, all staff must form an identity with the organization that is
ER staff must become both
b positive and complementary to its purposes. Boundaries of performance and behaviour
role models in terms of requirements
r must be established in order that these purposes are achieved effectively and
employee behaviour. successfully.
s In fact, ER staff must become role models in terms of employee behaviour as the
ER and HRM must be issues
i they deal with impact the style of workplace regulation. Above all, ER and HRM must
seen as continuous
processes and an area be
b seen as continuous processes and an area for constant improvement. If designed and con-
for constant improve- ducted
d effectively by the organization, it will constitute a major return on the investment made
ment. in
i the workforce as a productive entity. In this context, it needs to be appreciated that even
the
t use of the term “human resources” is slowly getting replaced by “human capital”. Human
resource
r can become human capital only if deployed on productive work and assures an opti-
mal rate of return on the investment made in terms of recruitment, training, etc.
The ER strategy adopted must, therefore, be supportive of, and complementary to, the
wider aims and objectives of the organization. This will depend on the competence of the
workforce. But ultimately, the workforce must be tuned to the needs of the organization.
Effective ER strategies start from this point. They may have highly trained or professional
employees; however, the overall direction of ER will seek again to match these with organiza-
tional requirements.
In organizations where the staff has a very strong group identity—because of their pro-
fession, or because of sectoral traditions, or a long history of unionism—the organization
must work to ensure the harnessing and commitment of the staff members to its own pur-
poses. If such “group think” behaviour is generated, it ultimately leads to devising IR strate-
gies that have a collectivist approach.
Furthermore, work cohort emerging from inter-group dynamics may result in major con-
flicts between the “professional” commitment to clients and that to the management. Employee
relations in these situations are largely ineffective. This is because of the inability of the organi-
zations to direct their professional staff in ways universally understood as effective, and because
of their lack of regard for, or ability in, ER matters. It has been compounded by the perceived
conflict of objectives between service managers and service professionals.
Labour-intensive enterprises that have easy access to cheap labour have traditionally
taken the view that conflict is inherent, and have sought to devise “safety-valve” ER strate-
gies, to ensure, as far as possible, that when conflict does blow up, it can be contained without
M08_SING6013_01_C08.indd 146 6/15/10 3:01:33 PM

serious disruption to the work in hand. The employees in such organizations join the union,
which provides welfare, leisure and recreation facilities, support for families in case of death
or injury, represent their disputes, and lobby for increased investment in safety and technol-
ogy. This is practised in the coal-mining sector. The workers’ loyalty has been first and fore-
most to the union and no managing organization, either private or nationalized, has been
able to provide an identity equivalent to this.
The ER strategy adopted will have to be supported by personnel/staff handbooks and
rule-books, the procedures used and the ways in which these are promulgated, and any for-
mal structures that are devised and put in place.
PR O CED URES AND P OLI CI E S. Conformist ER requires the subordination

of divergent and conflicting interests at the workplace, in the interests of pursuing common
and understood goals. These are clearly specified by the organization in advance through staff
circulars/brochures and other forms of internal communications. The emphatic focus is that
the organization must be successful, effective and profitable, and that the purpose of ER is to
contribute to this. This approach places primary responsibility on the organization and its man-
agers. Standards are preset and prescribed, and are not the subject of negotiation. Areas of
managerial prerogative, matters for consultation, and aspects open to negotiation are all clearly
defined. Conformity leaves much open to consultation, but very little to genuine negotiation.
The procedures have to be quick and direct. The conflicts are not assumed to be dysfunc-
tional, and managers seek to solve problems and promote harmony. The conflicts of interest ER strategy must be sup-
portive of, and comple-
between groups are kept to a minimum, and the disputes are resolved within given deadlines. mentary to, the wider
Staff identity with the organization must be strong and, hence, initiatives need to be taken aims and objectives of the
to promote organizational citizenship. The position of trade unions or any other staff-repre- organization.
sentative bodies is clearly defined and limited at the outset. The basis of any agreement is set Where staff has a very
by the organization. The union or representative body is invited to work within it. A union strong group identity,
unable to do this does not get recognized. employee relations may
This approach to ER is seen adopted especially by Japanese companies operating in the evolve to harness the
West. It is a conformist approach. The ER agreement is made between the company and group commitment to the
organization’s purpose.
one trade union, along the conformist lines indicated above, with the overriding concern of
streamlining and ordering workplace and staff relations, to ensure that their operation is as Labour-intensive orga-
effective and ordered as any other business activity. This implies that in case it is deemed fit nizations may adapt a
“safety valve” framework
to have a trade union, the organization recognizes one single union. Pre-designed and prede- for managing ER.
termined by the organization, agreements with the union are normally limited to a single site
or operational division.
To be effective and successful, this strategy for the management of ER must have the fol-
lowing attributes:
It must mirror the philosophy, ethos, style and values of the organization concerned;
there must be a visible commitment to it.
Managers and supervisors are trained to manage staff on a basis free from inherent
conflict, and are encouraged to solve rather than institutionalize problems, when they
occur.
Wage levels tend to be competitive and revisions never backdated.
There is one set of procedures, terms and conditions of employment only. The ER
sphere is not a matter for joint negotiation or agreement.
Disciplinary and grievance practices operate from the standpoint of resolution and
prevention of the matters in hand rather than institutionalization.
The aim is towards positive discipline. Policies and procedures are designed for the
optimum speed of operation.
This style of ER, oriented to business needs, is designed as a part of the process of ensuring
the success, continuity and profitability of the organization.
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If the intention is to avoid unionization, then the reasons why people join unions must
be removed. Trade unions grew to prominence in organizations to represent the employees’
interests. So an approach to ER that precludes the need for outside representation is essential.
This normally consists of adopting a welfare-driven, consultative and open mode of commu-
nication. Equity and fairness have to be the principal foundation of ER. The responsibility for
the style and tone of employee relations rests entirely with the organization. The staff adopts
the desired corporate attitudes, values and aspirations more through a strong internal drive
towards organizational citizenship.
In the direction and management of organizational and workplace employee relations, it
is necessary to translate both the background and the legal provisions into a policy statement
for effective ER operations and activities. This means understanding:
The culture and background of the employees
The perspective of work
The basis of the prevailing expectations and attitudes to work
The legal requirements, both in broad terms and also their specific application to the
particular organization, and the operation of its sector or sectors overall
A blend of the following PPolicies need to be written and widely circulated for the purpose of regulating workplace
principles in varying aactivities—general employment practices, standards and approaches, general standards of
proportions sets the tone wworkplace conduct and activity, discipline, grievance, disputes, health and safety, internal
for an ER policy of an oopportunities and equality. They are used by managers in their pursuit of established, stan-
organization: ddardized operating procedures and the successful operation of different aspects of work.
Equity They are for guidance, and only where something requires precise operation (such as a safety
Flexibility pprocedure), or there is a legal restraint (such as with discipline), should they be adhered to
Employee participation sstrictly. Their purpose is to set standards of behaviour and practice at work. This also has
in management iimplications for the more general standards of decency, ethics and staff treatment that are
eestablished at the workplace. The procedures also indicate and underpin the required atti-
ttudes, and let everyone know where they stand. More generally, they define the scope and
limits of the influence of the workplace.
The procedures should always be in writing, and state precisely the scope and coverage.
They should be written in the language of the receiver, so that they are easily and clearly under-
stood and followed. This enables new employees to know at the outset the defined boundaries,
the dos and the don’ts, expectations and obligations on the part of both themselves and the orga-
nization. The procedures should be reviewed after due consultation and updated regularly. The
final responsibility of ER policy design and implementation remains with the organization.
Policies and Procedures
Typically, the policies and procedures must address the following standards:
Need to be written The desired attitude, approach, standpoint by which ER is to be conducted

in a language easily The ethics, standards, attitudes, values and beliefs necessary for effective conduct
understood
Should be widely The composition, style and approach of ER and employee handbooks, manuals and
circulated procedures
Consulted for guid-
ance The specific attitude and standpoint from which organization discipline is to be estab-
Set standards of work- lished and implemented
place behaviour and Specific organizational and operational management issues arising from the com-
practices
position and mix of the workforce, the nature and location of the sector or sectors
Define the scope and
limits of the influence in which activities are carried out, technology used, and the ways in which work is
of the workplace designed
Specific sectoral operational issues such as volatility, seasonality, poaching and
attrition
Specific sectoral psychological issues such as social respect and esteem
Specific sectoral preconceptions, prejudices and behavioural prejudices
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8.2.2 The Role of an Employee Relations Manager

Some of the important functions to be handled by an employee relations manager in a con-
temporary organization would include the following:
1. The maintenance of employee motivation. The managers must establish formal,
semi-formal and informal chains of communication with workforce representatives
and with employees at large.
2. Day-to-day handling of staff matters
3. Negotiations, dealing with disciplinary and grievance matters, handling disputes
and other problem-solving activities
4. Balancing the conflicting demands of groups of employees
5. Facilitating HRM by creating an atmosphere of positivism and industrial harmony.
In case an atmosphere of mistrust prevails, it is the responsibility of the ER man-
ager to move from problem to problem to ensure the attainment of some desirable
solutions. The ability to make any progress and shape a more positive and effective
future for the staff in such circumstances will stem from an understanding of the
status quo in the first place.
6. A general appreciation of the traditions, history and background of ER and creating
opportunities for reviving or practising the same
7. Bargaining activities
8. The resolution of conflict or negotiations
9. Reform if required to be carried out, either globally or at the workplace, in relation
to new systems devised and implemented
8.3 Culture and Employee Relations

Both the organization structure adopted and the culture demonstrated by collective beliefs,
values and ethics must match the overall purpose of the organization. This must be done in
ways that ensure the best possible return on investment for an effective employee relation-
ship, which translates into performance, responsiveness and adaptability. It is necessary to
recognize that no two organizations are exactly alike.
All organizations are different. They have different methods of operation and working,
different ways of doing things, different values, attitudes, beliefs and norms—different per-
sonalities, in fact. They are as different from each other as people, yet can be defined by a set
of features, which translate into organization culture.
Organization Culture
The age and history of the organization, the degree of prominence that it has estab- and Employee Relations
lished, its traditions, its reputation and how this has arisen, its image, its standing in
Age and history of the
its markets and communities. The history, traditions and reputation require manage- organization
rial understanding and activity to develop them further and, where necessary, to take The size of the organi-
remedial action. zation
The nature of work
The size of the organization and related elements of spans of control, degrees of cen-
Technology
tralization and decentralization, departmentalization and divisionalization, the bal-
Location
ance of primary and support functions, the nature and style of all activities. It is also
The environment
necessary to consider information systems, other control mechanisms, reporting
People factors
relationships and systems for the monitoring and evaluation of performance.
Mission
The nature of work, the mix of skills, knowledge, expertise, professionalism, technical Core values
capability and other activities. People who are highly professionalized or trained bring Management style
distinctive sets of values with them, which may rub against those of the organization.
M08_SING6013_01_C08.indd 149 6/15/10 3:01:34 PM

Particular approaches are required, therefore, to generate organizational and opera-

tional harmony. Potential differences must be recognized at an early stage. Highly
ordered and regulated tasks and series of tasks are normally mirrored in the organiza-
tion of people to carry them out. At the other extreme, projects that involve pioneer-
ing and innovative work often require little formal direction, leaving much to the
self-motivation and self-organization of those involved.
The relationship between culture, structure and technology is a critical feature of the
operational aspects of ER management. Small-scale activities require a lower and
more flexible organization than do those with large scale, permanent or semi-perma-
nent and mass-output methods. In large, complex organizations, economies of scale
and the ER implications have to be considered, alongside questions of production
and work-group organization and departmentalization. From this, there are implica-
tions concerning alienation, dysfunction, and organized labour and representation.
The speed at which technology changes or becomes obsolete must also be considered.
Organizations cannot seek permanence or stability in an era of rapid technological
change or innovation. Even where a particular technology is deemed to have a degree
of durability, its permanence may easily be called into question through the inven-
tion of a substitute, or substitute method of working, for the activity in question. The
investment made in technology by organizations also has implications for the culture
(and, therefore, the management of ER). Organizations that continuously upgrade
their technology must also regularly improve their expertise and capability to exploit
it to its full potential.
The ability to work in harmony with the prevailing local customs and traditions. This
includes religious and ethical, as well as social, pressures. It is certain to include legal
constraints. There are also population size and mixes, access to services, age and
composition of the local workforce. There will be standards set by other employers
in the area (especially large employers) that have implications for all those working
close by.
The relationship between the organization, its markets, customers and clients, its
competitors and its broader environment. This includes confidence, expansion,
and contraction, economic and social factors. It includes local reputation as an
employer. The states of environmental flux, diversity and complexity require orga-
nizations that can cope with, respond to and exist in harmony with the changes. It
is also necessary to note the degree of stability of the environment. This includes
threats and dangers of organization collapse, expansion, contraction and takeover,
the loss of markets or the gaining of new markets, and also gains and losses in
standing and confidence. The overall ability of the organization to survive and pros-
per in relation to its environment, and to fight battles with it when necessary, must
be considered.
People factors constitute a broad understanding of those who come to work for the
organization. Different kinds of relationships are formed between the people and
their organizations on the basis of degrees of professional and technical expertise,
personal characteristics and attributes of status, ambiguity, stability and identity, and
also their appropriateness to the form of organization in question. For example, a
person who has a desire for a senior designation will not get this in a small, flexible
organization. Nor will he or she get the same measure of order and stability from this
organization as from public service, the government, or a multinational establish-
ment. On the other hand, people with high energy, enthusiasm and ability are more
likely to get frustrated in slow-moving, highly formalized organizations than in those
that are flexible and dynamic.
The extent to which the mission is clear, articulated, understood and accepted by
all concerned, and the simplicity or complexity of the goals. There are also likely
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to be subordinate aims and objectives, which may, on the face of it, conflict with
the main stated purpose. It is also necessary to recognize that organizations change
their purposes and directions. This occurs for a variety of reasons—shifts in talents,
qualities and technologies, new opportunities, market changes and technological
advance.
A clear positive set of values or direction given by the organization to its people,
with which they can all identify. The adoption of shared values is central to the gen-
eration of high levels of commitment and motivation among the staff. Recognizing
that people bring a diverse range of qualities, and their own attitudes; values and
beliefs, is essential. Giving them a clear corporate purpose that is both above indi-
vidual aspirations and capable of accommodating them is a key feature of effective
ER management. It gives a clear indication of the prevailing ethics and morality of the
organization.
There is a close interrelationship between the management style, the work that is car-
ried out and the way in which it is organized and directed. It is affected by the size,
complexity, scale and scope of the organization. In turn, it is also affected by hierar-
chical considerations, nature and degrees of conformity, alienation, the nature and
mix of work, the commitments, qualities, capabilities and attitudes of the staff carry-
ing out the work, and the expertise and capacities of the managers and supervisors.
ER policies would be primarily influenced by the organization culture. As an example, let us
take three distinctive cultures and see how the ER policies need to be devised to overcome
the barriers that such cultures create.
People/person culture: is where a group in their own overriding interests band together
to produce an organization for their benefit. It is to be found in certain research groups,
family firms, and companies started by groups of friends. In ER terms, the emergence of
people cultures would invariably cause conflict with the broader organization at some point
in time. Thus, subcultures emerge as lobbies with vested interest groups and would lead to the
emergence of ER policies that cater to the needs of the most powerful subgroup. The equity
principle has to be predominant here.
Task culture: is found in project teams, marketing groups and market- and customer-
oriented organizations. The emphases are on getting the job completed to the customer’s ER Policy – Organization
Culture Match
satisfaction, maintaining levels of customer and client satisfaction and responding to, and
identifying, new market opportunities. At their best, task cultures are flexible, dynamic, adapt- People/Person Culture
able and responsive. They accommodate the movements of staff necessary to ensure effective Task Culture
project and development teams and continued innovation, and require a degree of personal, as Role Culture
well as professional, commitment in the pursuit of customer satisfaction. In the management
of ER, task cultures are prone to conflicts caused by confusion and task ambiguity/overlap or
overload problem. Conflicts may also be caused where a group or groups perceive their task
identity as distinct from others. A few members who idle away the time while the others per-
form tasks (called social loafing) leading to group frustration over carrying passengers is also
likely. ER policies must, therefore, ensure conformity and consensus.
Role culture: is found where organizations have gained a combination of size, perma-
nence and departmentalization, and where the ordering of activities, preservation of knowl-
edge and experience and stability are important. The roles are defined, described and ordered.
The role culture reflects the bureaucratic concept of hierarchy and permanence. Role cultures
operate most effectively where the wider environment is steady and a degree of permanence
is envisaged and where the demand for products and services is known to be relatively per-
manent and certain. Role cultures are governed by procedures and rule books. Conflicts and
disputes arise, in ER terms, when there are breaches (or perceived breaches) of the rules of
procedures. When conflicts do arise, each step of the way is governed by procedures that
must be adhered to. At their best, these forms of ER are orderly and proceduralized; at their
worst, they institutionalize and prolong conflict, which leads to frustration and alienation on
the part of those involved.
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8.3.1 Culture Design for Employee Relations

Whatever is done must be positive and not simply allowed to emerge by default. The values,
aspirations and direction of the organization must be conveyed to all those who come to
work, so that they clearly understand the attitudes, values and beliefs of the organization.
Concerning some staff, this may involve a mutual rejection—organizations accommodate
dissenting staff to the extent that dissents can be harmonized or made productive; to
go further requires a dilution of core purpose and values. Other organizations take the
view that however expert an individual may be in their chosen field, their way of work-
ing might not harmonize with the particular requirements of the situation. Flexibility,
fluidity, responsiveness and initiative are all essential components of the establishment
of, and ordering of, the culture and also the structure of organizations. This, then, forms
the basis for:
The Approach of ER: Its purpose and direction, the fundamental approach and atti-
tude, suitability for organizational purpose
ER Policy: The attitude and approach to key issues—organization discipline, the
issues concerning discipline and grievances, pay and rewards, improvements in
working conditions, the management style, managerial attitudes, the expectations of
trade unions and/or other employee representative bodies
The Content of ER Activities: What is included and what is not, where managerial
prerogative lies, those matters open for consultation, the constitution of committees,
groups and other representative bodies
Compensation Policy: The management of pay and rewards, the attitudes to pay and
rewards, differentials, equality and inequality, factors such as gain-sharing and profit-
Flexibility, fluidity, respon- sharing options
siveness and initiative
Problem Resolution Approaches: The organizational points of view on issues con-
determine the establish-
ment and ordering of the cerning pay and rewards, discipline and grievances, health and safety
culture and structure of
ER Systems: Formal systems, informal systems, systems for the management of spe-
organizations. This, in
turn, determines: cific issues—especially discipline, grievance, pay and reward, and health and safety
The approach to ER Employee Communications: The process of communications, the content of written
The broad ER policy and formal communications, the content of face-to-face communications and orga-
Scope and coverage nization responsiveness to employee issues
of ER activities
Organization Development in ER: Attitudes to staff and management training, pri-
Compensation strategy
orities for staff and management training, approach and content of the training, espe-
Communication
approach and struc- cially in negotiating skills, problem-solving, health, safety and emergency procedures
ture and communications
ER systems
Decision-making Processes: Organizational and managerial standards and stand-
Approach to problem-
points, content of decision-making processes, the extent to which these are auto-
solving
cratic, consultative, participative or democratic
Decision-making pro-
cesses The Conduct of ER: Including consultation and participation, collective bargaining,
Organization develop- the constitution of committees, the agenda of committees, the remit of committees,
ment
the extent of value and importance placed on key issues through these meetings—
especially concerning pay and the conditions of health and safety
8.3.2 Organizational Behaviour in Culture Design

Identity and commonality of purpose can only be achieved through an understanding of the
people who work in the particular organization, their wants and needs, hopes, fears, desires
and aspirations. The following would contribute to this understanding and, therefore, must
be taken into account with the employee relations strategies:
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Leadership: Qualities and capabilities, and the roles and functions adopted in ER.
The nature and style of leadership, in the particular field of ER, plays a critical role in
the creation of human structures and systems, motivation and direction, the resolu-
tion of conflict, the creation of overall vision and direction and recognizing the obli-
gations that go with this, including providing resources.
Communication: An understanding of the processes, perception and the principles
of effective communication. The style, type and language of communication, through
absence or indifference, cause the generation of, and reinforcement of, attitudes and
behaviour related to negativity, alienation, uncertainty and anxiety. In ER terms, oral
communication is required for conducting discussions and briefings with the staff,
conducting negotiations, consultations and effective interviews (especially grievance,
dispute and discipline), conducting effective performance appraisal and handling
staff and organizational problems. Employee relations
strategies must draw from
Decision-making: The processes by which effective decisions are achieved, their com- findings in the following
munication and promulgation, and their acceptance. The general objective of anyone areas of organization
behaviour:
in the position of having to take decisions must be to minimize risks and uncertain-
ties, minimize negative consequences, and to maximize the chances of success and Leadership
effectiveness. In order to stand the greatest chance of success, therefore, participation Communication
and consultation need to be considered. Decision-making
Power and authority
Power and Authority: Sources of power and authority, the use of power and author-
Management of con-
ity in ER situations. In terms of the organization and management of ER, it is neces- flicts
sary to understand the following:
䊊 Power and influence reside in the hands of managers because of the confidence in
which they are held, as well as the expertise that they hold.
䊊 Power and influence reside in the hands of supervisors and the employees’ repre-
sentative because of the extent of the support that they command.
䊊 It is essential to understand the extent of reward power present in particular
situations—especially the capability of organizations and their managers to deliver
things that have been agreed upon.
䊊 Authority and influence have strong behavioural connotations. Besides hav-
ing legitimized positions and designations in the hierarchical structure, there
has to be a measure of confidence and belief in the individuals, in the first
place.
Conflict in Organizations: Sources, existence, management and containment. An
area where specialized employee relations departments and officials can make key
contributions to organizational effectiveness is in the analysis of the potential for, and
the reality of, conflict in their organizations.
8.4 The Future of Employee Relations

As discussed earlier, the paradigm shift from “industrial relations” to “employee relations” has
created a change in the perceptions of what it is, what it constitutes and what it should achieve.
In the UK, there has been a transformation in the status and influence of trade unions and,
while in UK terms, this influence has declined, both the EU at large and different organiza-
tions from other parts of the world ascribe very distinctive directions and objectives to the
institutions and practices of ER. In India, the trade unions are rather inactive in comparison
to the aggressive stands that were taken by them earlier.
The transformation is driven by a combination of technological changes, global-
ization of operations and markets, advances in managerial expertise, advances in the
understanding of human behaviour patterns, changes in aspiration and expectations in
M08_SING6013_01_C08.indd 153 6/15/10 3:01:35 PM

w
work situations, and changes in organization structures compounded by specific initia-
Forces Driving
Organizations Towards
ttives such as privatization, cost-cutting measures, and shake-ups for gaining competitive
an ER Orientation aadvantage.
Organizations offering security provisions through lifetime employment are continuing
Technological changes
tto do so with training, retraining and redeveloping employees. There is also the recogni-
Globalization of oper-
ations and markets
ttion of the position of staff as legitimate and key stakeholders in organizations, and new
Advances in manage-
fforms of profit-sharing and gain-sharing options have emerged. The EU has institutionalized
rial expertise this t approach of “social partnership”, and embodied it in the social charter. This means that
Advances in the under- organizations
o are increasingly required to adopt positions of openness, honesty, employee
standing of human participation
p and effective communication. This in itself becomes the means of focus for the
behaviour development of the organization, and the generation of harmony and understanding neces-
d
Changes in aspiration ssary to benefit everybody who works within it.
and expectations in New and current approaches are concerned to ensure that ER is both cost effec-
work situations
ttive and suitable to the needs of the organization. Direct relationships are established to
Changes in organiza-
tion structures
rremove barriers of alienation and motivation. Current approaches to ER stem from an
Specific initiatives
organization-wide belief that there is a contribution to be made to organizational per-
o
such as privatization, fformance, customer satisfaction, competitive edge and, above all, profitability if they are
cost-cutting measures, aadopted.
and shake-ups for The future of ER is, therefore, dependent on the following:
gaining competitive
advantage Clearly established standards that are communicated well, and training provided for
conformity
Managers are trained to value and adhere to those standards
Problem-solving, decision-making and the resolution of disputes, grievances and dis-
ciplinary issues are conducted both from the standpoint of equity and fairness, and
with a view to enhancing total departmental performance.
8.4.1 Transition
If ER is to be used as an effective and profitable managerial and organizational activity, the
first step is to identify the organizational barriers, which could be the following:
Tradition: This is a problem where there has been a long history of successful work
in specific, well-understood and widely accepted ways.
Success (and perceived success): If the organization is known or perceived to be suc-
cessful in its current ways of doing things, then there is resistance.
Failure: This is a barrier to change where a given state of affairs has been allowed to
persist for some time. Resistance occurs when someone determines to do something
about it—again, upsetting an overtly comfortable and orderly status quo.
Technology: It is often the driving force behind jobs, tasks, occupation and activities.
Their disruption causes trauma to those affected by the consequent need for job and
occupation change, retraining, redeployment—and often redundancy. Technological
changes, in turn, cause changes to work patterns and methods.
Vested Interests: Needs for change are resisted by those who are, or who perceive
themselves to be, at risk and for whom the current order represents a clear and guar-
anteed passage to increased prosperity and influence.
Managerial: The managerial barrier is a consequence of the divorce between owner-
ship and control.
Bureaucracy: The bureaucracy barrier occurs where patterns of order and control
have grown over long periods in the recording and supervision of activities and in the
structuring of organizational functions.
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8.4.2 Employee Relations and the Management

of Change
When changes are required, all methods of communication at the disposal of the organiza-
tion are to be invoked. This includes statutory obligations to consult with trade unions and
other recognized staff-representative bodies. Good practice also requires that many different
channels of communication are used, paying special attention to those who do not have
formal representation. When great changes are involved, it is also usual for there to be specific
individual and group problems that cannot easily be resolved in the greater scheme of things.
It follows from this that it would be necessary to offer individual and group counselling and
support methods and mechanisms. These are for the purpose of reassurance, the contin-
ued addressing of lingering or persisting uncertainties, and the means of tackling individual
cases. They also reinforce organizational concern for, and commitment to, the specific needs
of individuals and groups.
Problems are fewer, become apparent earlier, and are easier to tackle, when a general
stance of openness and assertiveness is adopted. It also emphasizes the concern that organi-
zations have for all employees. It may also be necessary to tackle managerial and supervisory
groups, in order to ensure their support for what is proposed.
The most serious problems arise when, for whatever reason, the employees do not believe
the message that they are receiving on account of a history of bad employee relations. It may
be necessary for organizations in this situation to acknowledge their failings of the past and
constitute working parties to demonstrate integrity of purpose in this set of circumstances.
Trade union, if they still exist, need to be engaged as workplace social partners. If
employee interests are to be given the same status and legitimacy as shareholder interests,
then employee representatives have to be the subject of a distinctive and defined organiza-
tional approach. Discuss the issues raised in Box 8.2.
A streamlined approach to the organization and management is the key to continued
development of effective ER. The main issue remains the continued development of aware-
ness and expertise in the totality of employee relations, and the contribution that it makes to
the effective, profitable and enduring management of organizations. Particular attention also
needs to be paid to the following:
Technological Advance and Its Impact on Work Design and Task Design: This
necessitates continued investment in training and development.
Investment: It is important to invest in the creation of high-quality work environ-
ments for employees, regardless of the length of service, hours of work, or occupa-
tion carried out. Investment is also required in flexibility, dynamism, creativity and
responsiveness, each of which has a direct measurable effect in terms of reduced sick-
ness, absence, turnover, and conflict and grievance, as they advance employment sat-
isfaction and security.
Culture, Attitudes and Values: Organizations need to develop and adopt specific
attitudes and values to
䊊 Support the organization’s core values
䊊 Be capable of accommodating the differing, and often conflicting, interests of the
employees
䊊 Transcend local cultural pressures
Discuss the reasons for the paradigm shift from industrial relations (IR) to employee relations
(ER). In an employee relations framework, the intervention of State will reduce increasingly.
Discuss with examples from contemporary developments in the Indian industry.
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䊊 Create a basis of long-term, mutual commitment, serving the interests of the orga-
nization, its customers and the wider community as well as its staff.
Business Across Cultures: This especially applies to organizations operating in the
global market. This means creating attitudes and values, and supporting these with
managerial capability, so that cultural differences are transcended.
Strategy: ER strategy is increasingly concerned with developing and reinforcing
long-term clarity of employment purpose. This means:
䊊 Reconciling the range of conflict inherent in the mix of staff capabilities and exper-
tise present
䊊 Investing in and committing to the long-term in terms of technology and the
derived investment necessary in building competence
䊊 Generating staff loyalty and commitment through a corporate determination to
have a long-term future
Above all, this means attention to attitudes and values, training and development,
and to the managerial expertise required for effective ER. It constitutes a mutual and
continuous obligation.
Flexible Patterns and Methods of Work: This is based on a combination of the
demand to optimize investment in production and other technology, and the chang-
ing patterns of customer requirements. The fundamental shift in staffing patterns and
methods of work that has arisen as a result implies having the corporate will, and
managerial expertise and commitment, to ensure that whatever the pattern of work
or hours worked, all staff members are treated with the same fundamental principles
of equality and opportunity.
Ethics: There is a realization that there is a much greater propensity for custom-
ers to choose organizations in which they have confidence and which they can
trust.
All of this is only possible if there is a fundamental integrity of relationship between
the organization and its staff and, arising from this, a mutual commitment to a long-term
and enduring staff–management relationship based on openness, honesty and trust.
Employee relations involves the body of work concerned with maintaining employer–
employee relationships that contribute to satisfactory productivity, motivation and morale.
Essentially, employee relations is concerned with preventing and resolving problems involv-
ing individuals, which arise out of or affect work situations. The key to competent employee
relations is in effective communications. For the mutual benefit of the employers and the
employee, engaging in conversations and consultations rather than passing orders down the
line will be the way companies will operate. Rigid labour legislations and controls will become
less relevant and the government systems will have to look at the needs of the future. The
paradigm shift from IR to ER has begun in Indian corporate organizations as they become
important players in the global economy.
SUMMARY
The general level of understanding and appreciation required Factors that dilute behavioural boundaries and constraints
of the managers if they are to be truly effective in employee have to be recognized and whichever perspective is adopted,
relations management is deep and complex. they have to be managed actively and positively.
They must create a harmonious and productive working A distinctive ER strategy is required, and organizations
environment so that effective work can be carried out. need to take direct and positive responsibility for creating
M08_SING6013_01_C08.indd 156 6/15/10 3:01:36 PM

institutions, procedures and practices that are going to work It is essential to remember that all employee relations are
in the particular set of circumstances, providing their man- founded on the interactions of people, and, therefore, on
agers and supervisors the necessary training and instilling their behaviour and approaches in different situations. In
the right attitude to ensure that this is successful. principle, it is essential to understand that all organization
activities—of which ER is one—are dependent upon effec-
ER must be seen as a contribution to profitable and effective
tive leadership, communication and decision-making. The
performance, rather than a function.
absence of these causes ER problems, in exactly the same
The function of ER experts should be to ensure that organi- way as they cause production output and sales problems.
zation perspectives, strategies, policies and institutions oper-
Beyond this, it is essential to recognize the function of lead-
ate in harmony and that these are supported with managerial
ership, and the need for firm direction and authority in the
and supervisory expertise, staff awareness and understand-
management of ER and the potential for conflict and dys-
ing. In turn, the truly expert manager—in whatever field—
function that exists in all human situations.
must become an expert in daily employee management,
employee relations activities, and must recognize that their Only when the behavioural aspects of ER are recognized,
contribution and expertise in this part of the job is as impor- can an effective approach to the establishment and manage-
tant as in the others. ment of organization discipline, conflict and motivation be
contemplated and the establishment of effective institutions
The essential prerequisites to the total understanding of ER
for the conduct of both strategic and operational ER be
from the organizational perspective are leadership, commu-
considered.
nication, decision-making, power and conflict.
KEY TERMS
employee relations 141 pluralism 143 radicalism 143
unitarism 142
REVIEW QUESTIONS
1 What are the employee relations strategies used by 4 Discuss the cultural dimensions of ERM.
employers?
5 In the context of a future in global trade and industry, what
2 What are the functions of employee relations management? are the expected trends that are going to shape employee
How are they different from IR? relations? What would be the main forces driving these
changes?
3 What are the prerequisites for ERM? Are they prevalent in
the industry today?

1 What steps do organizations need to take to develop an ERM 2 ERM requires a congruence of conformity and consensus.
framework? Discuss with examples. Can this be effective using the psychological approach by
ERM? Elucidate with examples.
D E B AT E
1 ERM is here to stay and unions may no longer be required to 2 The ERM approach will work only in knowledge sectors or
protect the interest of the workers. where the challenge is on retaining talent.
M08_SING6013_01_C08.indd 157 6/15/10 3:01:36 PM

Best Textile Company Team Computers India
BEST Textile Company had an eventful history of dynamic Attrition in Team Computers India Private Limited, an INR 300
industrial relations and multi-union, arm-twisting tactics that crore IT infrastructure management company, has reached 40
had a detrimental effect on the organization’s performance. per cent. The company is growing at the rate of almost 20 per
The company has now been taken over by a French company cent per annum and the requirement for skilled and experi-
wanting to establish itself in India. The new CEO has begun enced manpower is pinching the company. The non-availability
the transformation process by initiating some employee-friendly of right-profile software/hardware engineers will become the
programmes enumerated below: main differentiator. Team Computers is an ethical company
and maintains the industry standards in respect of compensa-
Maternity Leave: Extended period up to one year, in case
tion and benefits. They adhere to all the statutory requirements
accumulated earned leave available
as far as labour-law provisions are concerned. The human
Childcare-in-house Facility resources department spends most of its resources scouting
for talent and maintaining an employee database. There is a
Pick-up–Drop: Even if the staff has his/her own vehicle
virtual war in the marketplace for talent. Employees are bar-
Canteen Facility: A subsidized/no profit basis gaining for—and getting—impossible terms including a five-
day week, flexi-timing, onshore deployment, full pay on bench,
Free-Local-Phone Facility
etc. The HR department has been dealing with a collective of
ATM Inside/Near the Office staff periodically to get a feedback on their requirements, but
these meetings turn out to be one-sided, economic demands
Cheque Drop Boxes
from the staff. Recently, you have heard that certain national
This in effect is a paradigm shift towards employee relations. trade unions are making forays into the IT sector to lobby for
But the CEO is also holding discussions with the four unions in the regulation of the working conditions. This would complicate
the three mills taken over and is initiating a process of recog- matters and will have direct impact on the cost and flexibility of
nizing a union through secret-ballot elections with the help of operations.
the Chief Labour Commissioner of the State.
1. What, in your opinion, are the fundamental issues faced by
1. Do you think the new CEO’s strategy would work? Give the management?
reasons.
2. What would be the correct long-term approach for handling
2. Can you enumerate the problems the new CEO is likely to these issues?
face with this strategy?
3. Do you think the entry of trade unions in the IT industry
3. What suggestions can you provide to facilitate smooth will make it less competitive?
industrial/employee relations at BEST Company?
NOTES
1 Center for Good Governance, Government of Andhra Pradesh, 2 John Gareth and Mary Mathew, Organizational Theory:
Handbook on Service Excellence—A Guide to Service Excellence Design and Change, 5th Ed. (Delhi: Pearson Education,
in Public Management with Lessons from Best Managed 2009), pp. 211.
Companies”, available online at http://unpan1.un.org/intradoc/
groups/public/documents/CGG/UNPAN026214.pdf.
SUGGESTED READING
Dayal, Ishwar “HRD in Indian Organizations”, Vikalpa, Oct–Dec, Raj, Aparna Industrial Relations in India: Issues, Institutions and
1989. Outlook (New Delhi: New Century Publications, 2003).
Joseph, Jerome “Challenges and Opportunities in Democratization Venkatratnam, C. S. Industrial Relations (New Delhi: Oxford
of IR”, Vikalpa, Vol. 14, No. 1, Jan–March, 1989. University Press, 2006).
National Commission on Labour Report (Second), Government

of India.
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part iii
legislations and
administration
M09_SING6013_01_C09.indd 159 6/15/10 3:05:05 PM

chapter nine
9.1 The Classification of Labour Laws After reading this chapter, you will be able to:
9.2 The Scheme for a Structured Study • Classify the existing pieces of labour
of the Acts legislations on the basis of their objectives
9.3 The Factories Act, 1948 • Identify the employment-related legislations
9.4 The Shops and Establishments Act, 1953 • Describe the objectives, scope and
9.5 The Contract Labour (Regulation and coverage of the major employment-related
Abolition) Act, 1970 legislations
• List the significant provisions of the act(s)
and their applicability to work situations
• Appreciate the need for reforms in a few
provisions
Labour Law Compliance in Karnataka

Rajeev Ranjan, Group HRM Manager for the Vardhan Engineering Group, was to oversee the people-related issues of 19
group companies ranging from design, consultancy, manufacturing and software applications to financial services.
The group, with a combined turnover of INR 70 billion had units spread over 5 states. The employee strength was 2,500 and
these were all categories of employees—blue-collared, clerical, supervisory, executive and managerial. Many of the units
also employed contractual and casual employees. Each of the group companies was operating in a highly competitive space.
Rajeev, while introducing best practices in all the units, was also responsible for compliance issues in various units.
And, being an experienced HR Manager, he knew how enormous the task was—considering the range of businesses the
group was into, at least 20 to 25 labour legislations got attracted to the group companies. From Factories Act to the Bonus
Act and the Maternity Benefit Act. Of course, there were a few units where even the Contract Labour (Regulation and
Abolition Act) was attracted. There was no way he could take risks with the compliance issues, nor did he want to, consider-
ing most of the laws were meant for the protection of the labour.
At times, however, he felt a few provisions of the laws had not kept pace with the changing times. A few laws had even
become irrelevant, he thought. The recent report of the National Labour Commission had looked into these issues and
recommended a streamlining of the plethora of laws keeping in tune with current realities. But a lack of consensus has
prevented the implementation of any of the changes.
The challenge that this poses for Rajeev is to have a trained internal group that is well-versed with the provisions of all the
laws applicable to the respective units, with special reference to all actionable provisions. The group prides itself on being
perceived as one of the most preferred places to work at.
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Labour Legislation
in a Changing Context
The competition in the global market to produce cost-effective quality products or services has put pressure on
organizations in India to drive employees to deliver. The focus has shifted from regulasting terms and condi-
tions of employment to regulating performance. India is witnessing a subtle shift in paradigm as far as terms
of employment contract are concerned. There are efforts to find a meaningful middle path between require-
ments of labour productivity that is closer to global benchmarks and, at the same time, within the require-
ments of employment-related legislations.
Post-reforms, there have been frequent news reports in favour of reforms in labour legislations in
the country. This clamour, at least from the employers’ side, is for the flexibility in hiring and fir-
ing, reduced burden on social security, the reduction of inspection regime (to be replaced by
self-regulation), etc. While these issues have been debated, no headway has been made in terms of
concrete legislative reforms.
Labour legislation in India comprises both central and state legislations. There are numerous
such enactments that give the impression that the labour market is inflexible in India. Most of the
enactments that are in force today took shape in an economy that was insulated from global forces.
Although the industries that emerged in this insulated economy have had to adapt to the provisions
of the existing labour laws, there is a pressing need to usher in labour-law reforms to make invest-
ments in India more attractive and the Indian industry more competitive in the new global economy.
Now, this clamour is one-sided and may give an impression that the only way to competitiveness is
through reforming the “restrictive” labour laws. The truth may be somewhere in between.
At this juncture, before we debate the need and direction of reforms, we need to develop a clear
understanding of the relevant provisions. It is also necessary to know the provisions to facilitate
compliance and appropriate decision-making. The ideal way to begin is to get straight into a myriad
of shop-floor situations and get a feel of the application of labour legislations. Before proceeding fur-
ther, read the caselets in Box 9.1 and discuss each of them with your peers and the instructor. After
you read the entire textbook, revisit this box and check your understanding.
We now have a “flavour” of a variety of situations where compliance may be needed. To study
labour laws, it would be sensible to follow the route map mentioned below:
i) Describe a logical framework for the classification of major pieces of legislations that are
relevant to the industry.
ii) Define a scheme that would make it easy for us to look at the main provisions of these leg-
islations in a structured manner.
iii) Relate the major provisions to actual application at the workplace.
It is not the purpose of this book to provide an exhaustive treatment of all the provisions of all
the labour-related laws. There are publications that contain the various “bare acts”. There are also
very good publications, which deal exhaustively with all the provisions of legislation and go on
to discuss the relevant case laws in detail. The purpose of this book is to enable an employee
relations manager or student to appreciate the various provisions in terms of actual application
and compliance.
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162 Part III Legislations and Administration

1. Amit is a bus conductor with DTC. He could not report for duty one day due to
an emergency at home. He could not inform his supervisor also. As a result, the
bus scheduling got disrupted causing a chain reaction and inconvenience to pas-
sengers. The next day, Amit’s supervisor refused to allow him to resume his work.
Instead, after asking him to wait for a couple of hours, the supervisor handed
to him a signed order dismissing Amit from service (the order was signed by the
supervisor). Is it alright?
2. Prabha has recently joined a BPO in Gurgaon as a customer-service agent. From
next week, she has been asked to report for duty in the night shift from 10 p.m. to
6 a.m. Can this be done?
3. Balwant is a Grade I welder in an automobile-manufacturing factory at Manesar.
His duty hours are from 8 a.m. to 12 noon and then again from 5p.m. to 9 p.m.
He, therefore, works for eight hours during a day. Is this alright?
4. The linesmen of an electricity-distribution company in Delhi have gone on a flash
strike. They have not given any notice. What action can management take? Does
the government have any role to play in this?
5. Munnalal is a messenger in an auto-component plant in NOIDA. One day, due to
some altercation, he slapped his supervisor. Other than slapping him back, what
action can the supervisor take against Munnalal?
6. Mr Paranjpe is the branch manager of a PSU bank at Masoodpur. The normal
office timing for the staff is from 10 a.m. to 5 p.m. with a 30-minute lunch break.
The bank stops all public dealings after 2 p.m. However, with the increased com-
petition in the banking sector, all the new banks have staggered working hours
from 9 a.m. to 9 p.m. Mr Paranjpe wants to change the timings in his bank also
as, otherwise, he will lose all business. Can he change the timings? How?
7. Can an employer sack a manager? How? Can he sack a worker? Can he ask a
worker to leave after complying with the notice-period formalities?
8. The workers at a major automobile company in Gurgaon are very agitated regard-
ing delays in the payment of their wages. Though they get their salaries every
month, the payment sometimes get delayed beyond 10–15 days. The workers are
not sure when they will receive their salaries. Can they do anything about it (other
than going on strike)? Do they have a legal remedy?
9. V. Subramanyam, Chargeman Grade III at a steel factory at Jamshedpur, while
supervising pouring of hot metal into ladles, suffered severe burn injuries when the
molten metal accidentally spilled over the floor. One such metal fragment pierced
one of his eyes causing complete damage to vision in that eye. Subramanyam was
given alternative employment by the same employer without any loss in salary. Do
you think he is entitled to any other compensation?
10. An aluminium-manufacturing unit in Renukoot, UP, employs labour on contract
for unloading of their raw materials from the railway wagons. These workers have
been working at the plant for the last nine years, although they are on the rolls of
a contractor. Can these workers claim permanent employment with the aluminium-
manufacturing unit? What would be the implications? Why do we employ people
on contract?
9.1 The Classification of Labour Laws

The various labour legislations can be classified in a number of ways depending
upon the object of study. For example, they can be classified on any one of the following
arbitrary bases:
M09_SING6013_01_C09.indd 162 6/15/10 3:05:07 PM

Labour Legislation in a Changing Context 163
1. Purpose:
a) Regulation of working conditions (terms of employment, procedure for employ-
ment, safety + health + welfare requirements)
b) Social security (protection against loss in earning and risks)
c) Regulation of wages and bonus
d) Industrial relations and conflict prevention
2. Legislature: Central or state or both. A sample of central legislations relating to various
labour and employment subjects is given at the end of the chapter in a tabular form.
3. Period of Enactment: Early days, pre-Independence, post-Independence
The National Labour Commission (Second), in its report (Chapter VIA) has also discussed
the labour laws under the following classifications:
1. Employment Relations
2. Contract Labour
3. Laws on Working Conditions and Welfare
4. Laws Relating to Wages
5. Laws Relating to Social Security
6. Miscellaneous Matters
Since this book is largely aimed at aspiring or practising HR managers in the organized sector,
it will be useful if we used the classification based on the purpose of the enactment. According
to this classification, the main enactments roughly fall under the following heads:
9.1.1 The Regulation of Working Conditions

1. The Factories Act, 1948
2. The Shops and Establishments Act, 1953
3. The Contract Labour (Regulation and Abolition) Act, 1970
Other similar legislations include The Mines Act, 1952; The Employers’ Liability Act, 1938;
The Child Labour (Prohibition and Regulations) Act, 1986; The Plantation Labour Act, 1951;
The Beedi and Cigar Workers (Conditions of Employment) Act, 1966; The Cine-Workers and
Cinema Theatre Workers (Regulations of Employment) Act, 1981; The Indian Dock Labourers
Act, 1934; The Inter-State Migrant Workmen (Regulation of Employment and Conditions of
Service) Act, 1979; The Motor Transport Workers Act, 1961; The Sales Promotion Employees
(Conditions of Service) Act, 1976; and The Working Journalists and Other Newspaper
Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955.
Of all these legislations, first three would provide a general overview of the genre and,
therefore, have been taken up for detailed treatment. This chapter would focus on the objec-
tives, scope, coverage, provisions and applications of these legislations.
9.1.2 Legislations Related to Social Security

1. Employees’ State Insurance Act, 1948
2. Workmen’s Compensation Act, 1923
3. The Payment of Gratuity Act, 1972
4. The Employee’s Provident Fund and Miscellaneous Provisions Act, 1952
M09_SING6013_01_C09.indd 163 6/15/10 3:05:09 PM

The above legislations are the main social-security provisions in India. These have been dis-
cussed in Chapter 10.
9.1.3 Legislations Related to Wage and Bonus

1. The Payment of Wages Act, 1936
The labour laws can be
classified in many ways. 2. The Minimum Wages Act, 1948
In the scheme followed 3. The Payment of Bonus Act, 1965
in the book, the major
labour laws have been These are covered in Chapter 11.
classified on the basis of
purpose as under:
1. Regulation of Working 9.1.4 Industrial Relations and Conflict Prevention
9
Conditions
2. Furtherance of Social 1. The Industrial Disputes Act, 1947
Security
3. Wages and Bonus 2. The Industrial Employment (Standing Orders) Act, 1946
Regulation
3. The Trade Unions Act, 1926
4. Industrial Relations
and Conflict The Trade Unions Act, 1926 has been discussed in detail in Chapter 7. The Industrial Disputes
Prevention
Act,
A 1947 shall be covered in detail in Chapters 12 and 13.
9.2 The Scheme for a Structured

Study of the Acts
For a student and a practitioner, the most important aspects of the labour laws, in the opinion
of the authors, are the applicability of the provisions in relation to:
i) the nature of the establishment and
ii) the category of employees covered by it (the definition of “worker”, “workman”,
“employee” under the different Acts).
To study the labour laws
in a structured way, it MMore so, during the last 15 years, many new categories of establishments and employ-
is necessary to have a eees have been added to the industry. To keep pace with the impact of globalization of
thorough understanding
of a few terms/concepts business, many new working practices have been introduced—24 7 work, off-shoring
b
that have been used in and
a on-shoring, the reduction of human interface, flexi-time, remote log-in and work,
different Acts. Specifically, distributed
d workplaces and mobile workforce, virtual offices, project-based assignments,
care must be taken to extended
e business hours, etc. It is important to understand the applicability of the statutes
understand the following: under
u the changing context. Even though the legislations in existence have not undergone
1. The definition and cov- many
m changes, a conceptual understanding will help assess their applicability in a fast-
erage of “workman”, changing
c business context. The focus, therefore, is on the conceptual framework rather
“worker”, “employee” than
t a detailed study of various provisions.
in each of the Acts
2. The meaning of “fac- Two other concepts, which have been used in different Acts, have the potential to
tory”, “establishment”, cause
c confusion. These concepts have been interpreted by various courts in the country,
“industry”, etc. in the at
a different points of time. A thorough understanding of these terms is also essential in
relevant Acts order
o to:
3. The definition and
judicial pronounce- i) have clarity on the applicability of the laws, and
ments on the “appro-
priate government”. ii) get an insight into the direction of industrial jurisprudence and also into the
thoughts of the different players of industrial relations on these concepts/
issues.
These two concepts are those of “appropriate government” and “industry”, both discussed
exhaustively in different fora. A definition of “appropriate government” and “industry” are
given in Chapter 12, The Industrial Disputes Act, 1947.
M09_SING6013_01_C09.indd 164 6/15/10 3:05:09 PM

9.3 The Factories Act, 1948

The first Factories Act was enacted in 1881 and amended in 1891. There were major changes
in the Act in 1934 on the basis of recommendations of The Royal Commission on Labour.
The Factories Act, 1948 was the outcome of the investigation and recommendations of the
Labour Investigation Committee appointed by the Government of India in February, 1944
to investigate conditions of employment in respect of various industries. The Act came into
force on 1 April 1949. In 1987, certain provisions with regard to safety and occupational
health were incorporated through an amendment.
There are similar and separate enactments for mines, plantations, and docks and ports
where the working conditions are typical. Knowing about one of these major Acts (Factories
Act) will provide familiarity and foundation for understanding the other Acts also.
9.3.1 Objectives
The beginning of modern legislation lies in factory legislation. The rapid industrialization and
urbanization without any planning resulted in unsanitary, unhygienic, unsafe and crowded
work and living places. Both quality of work-life and the quality of life itself were affected by
the capitalist’s quest for making quick bucks, unmindful of its social consequences. This led to
excessive hours of work and also resulted in employing young children for more than twelve
hours a day. The objective of this Act was to protect human beings from being subjected to
unduly long hours of physical strain or manual labour. The Act provided that employees
should work in healthy and sanitary conditions as far as the manufacturing process allowed
and that precaution should be taken for their safety and the prevention of accidents. The
main objectives of this Act are:
To protect health, safety and welfare of the workmen
Regulate hours of work, weekly offs and annual leave
Regulate the employment of women and young persons
9.3.2 Coverage
The Factories Act is a Central Legislation and extends to the whole of India, including Jammu
and Kashmir.
The provisions of this Act are applicable to all factories, including the factories that
belong to the central government or any state government.
The provisions of this Act cover persons who are included within the meaning of the
term “worker” as contained in the Act.
It would, therefore, be necessary to discuss the meaning and definition of the terms “fac-
tory” and “worker”, and all other terms that are needed to explain these two terms.
9.3.3 Applicability
The applicability of the Act will become clear once we understand the main terms—“factory”,
“manufacturing process” and “worker”. Please keep in mind that since this is a “beneficent”
legislation, for the good of the “weaker section of society”, historically the judiciary has been
in favour of liberal interpretation of the terms. What this means is that benefit of doubt while
interpreting a term has gone in favour of the workers.
What is a “factory”? A “factory” has been defined in Section 2(m) of the Act, and it
means any premises including precincts thereof:
i) Where 10 or more workers are working or were working on any day of the preceding
12 months, and in any part of which manufacturing process is being carried out with
the aid of power, or
M09_SING6013_01_C09.indd 165 6/15/10 3:05:09 PM

ii) Where 20 or more workers are working or were working on any day of the preced-
ing 12 months, and in any part of which manufacturing process is being carried out
without the aid of power.
To understand the above, we need to be clear about the concepts of “premises” and “pre-
cincts”, and “manufacturing process”. In the normal parlance, “premises” denote a building
where as “precincts” denote any space enclosed by walls. However, through a number of
judicial pronouncements, the scope of precincts and premises of a factory has been expanded
to include almost all buildings and spaces that fulfil the twin conditions of:
i) whether the manufacturing process is carried on or not, and
ii) whether 10 or 20 workers are working/have worked in any part of the premises
where manufacturing process is carried on.
9.3.4 Definitions
Let us now define a few critical terms related to the Factories Act.
A M ANUFAC T UR I NG P R O CE SS. A “manufacturing process” has been defined

in Section 2(k). It means any process for:
Making, altering, repairing, ornamenting, finishing, packing, oiling, washing, clean-
ing, breaking-up, demolishing, or otherwise treating or adapting any article or sub-
stance with a view to its use, sale, transport, delivery or disposal or
Pumping oil, water sewage or any other substance, or
Generating, transforming or transmitting power, or
Composing types of printing letter press, lithography, photogravure or other similar
process or book-binding, or
Constructing, reconstructing, repairing or refitting, finishing or breaking-up of ships
or vessels, or
Preserving or restoring any article in the cold storage
The above covers a very wide range of activities that come under the manufacturing process.
Without being stuck to the letter of Section 2(k), a very wide interpretation should be allowed
depending upon specific circumstances. The Factories Act being a “beneficent” legislation, the
interpretation has always been biased towards the inclusion of different activities under the manu-
facturing process. For example, the following have been held to be “manufacturing processes”:
Transmission of electrical power through supply lines for sale
Dry-cleaning of garments
Conversion of sea water into salt
The manufacturing process together with a prescribed number of workers would constitute
the essential elements of a factory.
Mines, covered under The Mines Act, 1952, a mobile unit of the armed forces, railway
running shed, hotels, restaurants and eating places are specifically excluded from the defini-
tion of a factory.
WHO I S A W O R KE R ? It is very important to understand the terms “worker”, “work-

man”, “employee”, “staff ” in the context of specific Acts. The Factories Act has defined the term
“worker”, whereas the Industrial Disputes Act has defined the term “workman”. This is one of
the most critical parts that needs to be understood by a student and a practitioner. They should
devote considerable time to understand the coverage and applicability of different Acts to
M09_SING6013_01_C09.indd 166 6/15/10 3:05:10 PM

different establishments and category of workmen. Clarity on these points will go a long way
in facilitating practical application of these laws.
The Factories Act, 1948 has defined a “worker” in section 2(l):
A “worker” means
A person employed
Directly or by or through any agency
With or without the knowledge of the principal employer (PE)
He may be employed with or without remuneration
A worker must be employed in:
The manufacturing process, or
In cleaning some parts of machinery or premises used for the manufacturing process, or
In some other kind of work incidental to or connected with the manufacturing
process
The above description is not a verbatim copy of the definition as contained in the Act, but it
captures all the essential components of the definition.
“Employment”, in the context of labour laws, would mean the co-existence of an “employer”
(one who engages the service of another person), an employee (one who works for another
for hire) and a “contract of employment” (employment results from a “contract for service”).
There should be a master–servant relationship between the employer and the employee. The
employee agrees to serve the employer subject to his control and supervision.
The employment may be directly under the employer or through a “contractor”. It would
not make a difference to the employee falling within the definition of a “worker”. The con-
tractor, in this case, becomes the employer, whereas the employer is termed the “principal
employer”. For example, suppose a steel-manufacturing company has engaged a contractor
for unloading of iron ore from railway wagons to the silos meant for the purpose of storing
iron ore. For the employees of the contractor, the Steel Plant is the principal employer and
the contractor is the employer. These employees would be deemed to be workers as per the
meaning in the Factories Act. The employee, to be defined as a worker, must be engaged in the
manufacturing process, or something incidental or related to the manufacturing process.
To sum up, the application of The Factories Act, 1948 can be schematically understood
as given in Figure 9.1. A complete understanding of this scheme will facilitate an easy recall
of all the important terms contained in the main definitions.
Figure 9.1
Factory A schematic
representation of the
Factories Act.
Premises and precincts
10 with power
Manufacturing process Workers

20 without
power
• Making, altering, repairing,
etc. • Employed
• Pumping • Directly or indirectly
• Composing (printing), etc. • With or W/O knowledge of PE
• Constructing, etc • With or W/O remuneration
• Preserving, storing, etc. • Manufacturing process
M09_SING6013_01_C09.indd 167 6/15/10 3:05:10 PM

Based on the preceding discussion and a reading of the definition of “factory” in the Bare
Act, discuss whether each of the following can be considered a “factory” or not (with rea-
sons). Please look up reference to provisions relating to hotels and IT industries:
NTPC Limited
Durgapur Steel Plant (Works Area)
Delhi International Airport
ICICI Bank Limited
New Delhi Railway Station
A Cold Storage
The Ashok Hotel
NIIT Technologies
From the description, you can see that banks, BPO centres, corporate offices, etc. do not have
any manufacturing process and would, therefore, normally be precluded from being called
a factory.
A production foreman on the shop floor of a CD-manufacturing factory employing 100
people would be considered a “worker” as per the meaning in the Factories Act, 1948.
For every employee, therefore, you can test whether or not he/she is a worker according to the
definition in the Factories Act and whether the relevant provisions would apply to them or not.
Another important definition is that of an “occupier” of the factory (Section 2(n)).
An “occupier” refers to a person who has the ultimate control of the factory. In case of a part-
nership, any one partner shall be deemed as the “occupier”. In case of a company, any one of
the directors, and in case of a factory owned by the central or state government, the person
appointed to manage the affairs of the factory shall be deemed as the “occupier”.
The Bhopal Gas Tragedy led to significant changes in the provisions of The Factories Act
in 1987, especially with respect to “hazardous processes” and the definition of an “occupier”.
The essence of the definition is the determination of the point as to who has the “ultimate control”
of the factory. There have been various judicial pronouncements on the interpretation of the term
“occupier”. It is important because the “occupier” has significant obligations under the Factories
Act. The “manager” of a factory can not be taken to be the “occupier” unless ultimate control has
been passed on to him by a resolution of the company. A discussion on the applicability of the
definition of “factory” to the entities mentioned in Box 9.2 will provide conceptual clarity.
9.3.5 Structure
The structure of the Factories Act, 1948 is diagrammatically shown in Figure 9.2.
9.3.6 Main Provisions

The Factories Act primarily aims at preserving the health, safety and welfare of the work-
ers working in a factory. The Act also provides for regulating the working hours, weekly
offs, leave with wages and the employment of young persons and women. For the workers,
being the “weaker section of the society”, the State has made elaborate provisions and institu-
tional framework to ensure that exploitation of labour by the employer does not take place.
Chapters 3 to 8 contain all the main provisions relating to health, safety, welfare and other
working conditions of workers. The other significant provisions are:
Approval, Licensing, and Registration of Factories (Section 6): Details regarding the pro-
posed factory along with schemes and drawings have to be submitted to the Chief Inspector
of Factories for approval. The Chief Inspector of the appropriate government must respond
within a defined time period. In the event of no response within the specified period, approval
will deemed to have been granted.
M09_SING6013_01_C09.indd 168 6/15/10 3:05:12 PM

Figure 9.2
Chapter 3 The Factories Act: A
Chapter 1 Health schematic representation
of the contents.
Objectives, Extent,
Definitions, Approval, Chapter 4
Licensing, Notice by
Occupier Safety
Chapter 4A
Chapter 2 Hazardous Process
Inspecting Staff
The
Factories Chapter 5
Chapter 9 Act, 1948 Welfare
Special Provisions
Chapter 6
Chapter 10 Working Hours
Penalties and Procedures
Chapter 7
Employment of Young
Chapter 11
Persons
Supplemental
Chapter 8
Annual Leave with
Wages
Notice of “Occupation”: Section 7(1) prescribes a notice to be sent to the Chief Inspector within
15 days before he begins to occupy or use any premises as a factory, detailing the name and situ-
ation of the factory, the name and address of the occupier and the owner of premises or building,
the nature of manufacturing process and address for communication relating to the factory.
Section 7 A (discussed in Chapter 2) is very important since it lists down the General
Duties of an Occupier, which are as follows:
1. Every occupier shall ensure (as far as is reasonably practicable), the health, safety
and welfare of all workers while they are at work in the factory.
2. The matters to which such duty extends shall include—
a) The provision and maintenance of plant and systems of work in the factory that
are safe and without risks to health
b) The arrangements in the factory for ensuring safety and absence of risks to
health in connection with the use, handling, storage and transport of articles
and substances
c) The provisions of such information, instruction, training and supervision as are
necessary to ensure the health and safety of all workers at work
d) The maintenance of all places of work in the factory in a condition that is safe
and without risks to health, and the provision and maintenance of such means
of access to, and egress from, such places as are safe and without such risks
H EALT H AND HY GIENE . Sections 11 to 20 of The Factories Act, 1948 detail

out the health provisions that need to be followed in “factories”. In particular, provisions for
health and hygiene comprise the following:
M09_SING6013_01_C09.indd 169 6/15/10 3:05:12 PM

Section 11—Cleanliness:
Every factory shall be kept clean and free from effluvia arising from any drain, privy or other
nuisance. The following precautions shall be taken in particular.
a) Accumulation of dirt and refuse shall be removed daily from the floors and benches
of workrooms and from staircases and passages, by sweeping or by any other effec-
tive method, and disposed of in a suitable manner
b) The floor of every workroom shall be cleaned at least once every week by washing,
using disinfectant, where necessary, or by some other effective method
c) Where a floor is liable to become wet in the course of any manufacturing process to
such an extent as incapable of being drained, effective means of drainages shall be
provided and maintained
d) All inside walls, partitions, all ceilings of tops of rooms and all walls, sides and tops
of passages and staircases shall
i) be repainted or revarnished at least once in every period of five years, where they
are not painted with washable water paint or varnish; where they are painted
with washable water paint, they shall be repainted with at least one coat of such
paint at least once in every period of three years and washed at least once in
every period of six months
ii) be cleaned at least once in every period of fourteen months by such method
as may be prescribed, where they are painted or varnished or where they have
smooth impervious surfaces
iii) be kept white-washed or colour-washed, and the white-washing or colour-
washing shall be carried out at least once in every period of fourteen months, in
any other case
e) All doors and window frames and wooden or metallic framework and shutters shall
be kept painted or varnished and the painting or varnishing shall be carried out at
least once in every period of five years
Section 12—Disposal of Waste and Effluents:

Effective arrangements shall be made in every factory for the treatment of wastes and effluents due
to the manufacturing process carried on thereon, so as to render them innocuous and disposable.
Section 13—Ventilation and Temperature:

Effective and suitable provisions shall be made in every factory for securing and maintaining
in every workroom:
a) Adequate ventilation by the circulation of fresh air, and
b) Such a temperature as will secure to workers therein reasonable conditions of com-
fort and prevent injury to any health hazard
Section 14—Dust and Fume:

This section prescribes effective measures, which should be adopted to keep the workrooms
free from dust and fume. In every factory, which, due to the manufacturing process carried
on, gives off any form of dust or fume or other impurity of such a nature and to such an extent
as it is likely to be injurious or offensive to the workers employed therein, effective measures
shall be taken to prevent its inhalation and accumulation in any workroom. If any exhaust
appliance is necessary for the above purposes, it shall be applied as near as possible to the
point of origin of dust, fume or other impurity and such points shall be enclosed as far as
possible. Further, in any factory, no stationery internal combustion engine shall be operated
unless the exhaust is conducted into the open air, and no other internal combustion engine
shall be operated in any room unless effective measures have been taken to prevent such
accumulation of fumes as are likely to be injurious to workers employed in the room.
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Section 15—Artificial Humidification:

All factories in which humidity of the air is artificially increased, the state government may
make rules—
a) Prescribing standards of humidification
b) Regulating the methods used for artificially increasing the humidity of the air
c) Directing prescribed tests for determining the humidity of the air to be correctly
carried out and recorded
d) Prescribing methods to be adopted for securing adequate ventilation and cooling of
the air in the workroom
Section 15(2) lays down that in any factory in which humidity of the air is artificially increased,
the water used for the purpose shall be taken from a public supply or other source of drinking
water, or shall be effectively purified before it is so used.
Section 16—Over-crowding:
No room in any factory shall be over-crowded to an extent injurious to the health of work-
ers employed therein. There shall be in every workroom of a factory in existence on the date
of commencement of this Act at least 14.2 cubic metres of space for every worker employed
therein. No account shall be taken of any space, which is more than 4.2 metres above the level
of the floor of the room, for the purpose (calculating the volume) of this provision.
Section 17—Lighting:
In every part of the factory, where workers are working or passing, the provision and main-
tenance of sufficient and suitable lighting—natural, artificial or both—should be ensured. All
glazed windows and skylights used for lighting of the workrooms shall be kept clean on both
the inner and outer surfaces and should be free from obstruction.
Effective provisions shall so far as practicable, be made for the prevention of—
a) glare either directly from a source of light or by reflection from a smooth or polished
surface
b) the formation of shadows to such an extent as to cause eye-strain or the risk of acci-
dent to any worker
Section 18—Drinking Water:
In every factory, effective arrangements shall be made to provide and maintain at suitable
points conveniently situated for all workers employed therein, a sufficient supply of whole-
some drinking water. All such points are to be legibly marked as “drinking water” in a lan-
guage understood by a majority of workers employed in the factory and no such point shall
be situated within six metres of any washing place, urinal, latrine, spittoon, open drain car-
rying sullage or effluent or any other source of contamination unless a shorter distance is
approved in writing by the Chief Inspector.
Section 18(3) provides that in every factory employing more than 250 workers, pro-
vision of cool drinking water during hot weather with effective distribution arrangements
should be made.
Section 19—Latrines and Urinals:
In every factory—
a) Sufficient latrine and urinal accommodation of prescribed type shall be provided con-
veniently situated and accessible to workers at all times while they are at the factory
b) Separate enclosed accommodation shall be provided for male and female workers
c) Such accommodation shall be adequately lighted and ventilated, and no latrine
or urinal, shall, unless specially exempted in writing by the Chief Inspector,
communicate with any workroom except through an intervening open space or
ventilated passage
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d) All such accommodation shall be maintained in a clean and sanitary condition at all
times
e) Sweepers shall be employed whose primary duty would be to keep clean latrines,
urinals and workplaces
In every factory wherein more than 250 workers are ordinarily employed—
a) All latrine and urinal accommodation shall be prescribed sanitary types
b) The floors and internal walls up to a height of 90 cm of the latrines and urinals and
sanitary blocks shall be laid in glazed tiles or otherwise finished to provide a smooth
polished impervious surface
c) The floors, portions of the walls and blocks so laid or finished and the sanitary pans
and urinals shall be thoroughly washed and cleaned at least once every day with
suitable detergents or disinfectants or with both.
Section 20—Spittoons:
Section 20(1) lays down that in every factory, there shall be provided sufficient number of spit-
toons
t in convenient places, which are to be maintained in clean and hygienic conditions.
Health-related
Provisions Figure 9.3 will aid recall of all the provisions related to health.
Section 11: Cleanliness

SAFE T Y P R OVI SI O NS. Elaborate provisions for the safety of workmen have been
S
Section 12: Disposal
made
m in Chapter 4 of the Act. Subsequently, in 1987, Chapter 4A was added, which had fur-
of Waste and Effluents
ther
t provisions related to hazardous processes. These provisions, contained in Section 21 to
Section 13: Ventilation
and Temperature 41,
4 are obligatory and further supplemented and elaborated by rules framed by each of the
Section 14: Dust and state
s governments. Briefly, the provisions of the Act are given below. In the end, the various
Fume safety-related
s provisions have been schematically described to enable easy recall and also an
Section 15: Artificial overall
o understanding of the provisions. Students, however, are advised to refer to the Bare
Humidification Act
A for detailed provisions. Bare Acts are easily available on the Internet. The simplified pro-
Section 16: Over- visions
v in the following paragraphs have been adapted from the Bare Act.
Crowding
Section 17: Lighting Section
S 21—Fencing of Machinery:
Section 18: Drinking In
I every factory, the dangerous parts of every machine are to be securely fenced. The follow-
Water ing
i have been stipulated:
Section 19 : Latrines
i) Every moving part of a prime mover and every fly wheel connected to a prime
and Urinals
mover, whether the prime mover or fly wheel is in the engine-house or not
Section 20: Spittoons
ii) The headrace and tailrace of every water wheel and water turbine
Figure 9.3
Provisions relating to Cleanliness Over-Crowding
health.
Wastes and Effluents

Lighting
Health
Ventilation and Temp Drinking Water
Dust and Fumes Latrines and Urinals
Humidification Spittoons
M09_SING6013_01_C09.indd 172 6/15/10 3:05:19 PM

iii) Any part of a stock bar that projects beyond the head stock of a lathe
iv) Unless they are in such position or of such construction as to be safe to every person
employed in the factory as they would be if they were securely fenced, the following,
namely—
a) every part of an electric generator, a motor or rotary converter;
b) every part of transmission machinery; and
c) every dangerous part of any other machinery
shall be securely fenced by safeguards of a substantial construction, which shall be constantly
maintained and kept in position while the parts of machinery they are fencing are in motion
or in use. Sub-section 1 provides for examination or operation to determine whether any part
of the machinery is in such position or such construction as to be safe.
Section 22—Work on or Near Machinery in Motion:
To take precautionary measures with regard to operational safety arising out of malfunctioning
of machines and defects in functional mechanisms, Section 22 provides for lubrication or other
adjusting operation carried out by a trained adult worker wearing tight-fitting clothing, which
shall be supplied by the “occupier” of the factory. Sub-section 2 ensures special protection to
women and young persons (below 18 years of age and above 15 years of age) against risk of injury
from any moving part either of that machinery or an adjacent machinery by prohibiting engage-
ment of women and young persons in the processes of cleaning, lubrication or adjusting opera-
tion of any part of a prime mover or any transmission machinery while these are in motion.
Section 23—Employment of Young Persons on Dangerous Machines:
No young person shall work at any machine (dangerous machines to be specified by the state
government) unless he has been fully instructed as to the dangers arising in connection with
the machine and the precautions to be observed and:
a) has received sufficient training in work at machine, or
b) is under adequate supervisions by a person who has a thorough knowledge and
experience of the machine.
Section 24—Striking Gear and Devices for Cutting off Power:
In order to ensure further safety of the workmen, Section 24 provides for—
(i) striking gear (ii) cutting power and (iii) locking device as under:
i) Suitable striking gear or other efficient mechanical appliance to be provided, main-
tained and used to move driving belt to and from fast and loose pulleys, which form
part of the transmission machinery
ii) Suitable devices to be provided, maintained and used for cutting off power in emer-
gencies from running machinery
iii) Locking device to prevent accidental starting of transmission machinery
Section 25—Self-acting Machines:
Keeping in view the possible likelihood of accidents, no traversing part of a self-acting
machine in any factory and no material carried thereon shall, if the space over which any
person is liable to pass, whether in the course of his employment or otherwise, be allowed to
run on its outward or inward traverse with a distance of 45 centimetres from any fixed struc-
ture that is not part of the machine.
Section 26—Casing of New Machinery:
Casing of any machinery driven by power is to be ensured to prevent danger of accidents.
This includes:
i) Every screw, bolt or key on any revolving shaft, spindle wheel or pinion to be either
so sunk, encased or guarded
M09_SING6013_01_C09.indd 173 6/15/10 3:05:20 PM

ii) All spur, worm and other toothed or friction-gearing, which does not require adjust-
ment while in motion, to be encased or so situated as if it were completely cased
Section 27—Prohibition of Employment of Women and Children near Cotton Openers:
In case the feed end is separated from the delivery end by a partition, the Chief Inspector
may permit in writing the employment of women and children at the feed-end side of the
partition.
Section 28—Hoists and Lifts:
Hoists and lifts should be of good mechanical construction, properly maintained and exam-
ined once in every six months. Protection by an enclosure fitted with glass, with safe work-
ing load indicated and gate fitted with interlocking or any other efficient device must be
ensured.
Section 29—Lifting Machines, Cranes, Chains, Ropes and Lifting Tackles:
These should be of good construction and examined once every 12 months. Safe work-
load limits, at least six-metre distance from any other workplace of employees, needs to be
ensured.
Section 30—Revolving Machinery:
In every room in a factory in which the process of grinding is carried on, there shall be per-
manently affixed to or placed near each machine in use a notice indicating the
maximum safe working peripheral speed of every grindstone or abrasive wheel
speed of shaft or spindle upon which taw heel is mounted and
the diameter of pulley upon such shaft or spindle necessary to secure such safe work-
ing peripheral speed.
Section 31—Pressure Plant:

If in any factory, any part of the plant and machinery used in a manufacturing process is oper-
ated at a pressure above atmospheric pressure, effective measures shall be taken to ensure that
the safe working pressure of such a part is not exceeded.
Section 32—Floors, Stairs and Means of Access:
In every factory, all floors, steps, stairs, passages and gangways shall be of sound construc-
tion and properly maintained and shall be kept free from obstruction and substances likely
to cause persons to slip, so that safety is ensured.
Section 33—Pits, Sumps, Opening in Floors, etc.:
In every factory, fixed vessel, sump, tank, pit or opening in the ground or in a floor which, by
reason of its depth, situation, construction or contents, is or may be a source of danger, shall
be either securely covered or securely fenced.
Section 34—Excessive Weights:
No person shall be employed in any factory to lift, carry or move any load so heavy (the state
government to prescribe weights specifically for adult men and women, adolescents and chil-
dren) as to be likely to cause injury.
Section 35—The Protection of Eyes:
The state government is to prescribe rules regarding the use of effective screens or suitable
goggles, which shall be provided for the protection of persons employed on or in the immedi-
ate vicinity of the process that is likely to involve (i) risk of injury to the eyes from particles or
fragments thrown off in the course of the process, or (ii) risk to the eyes by reason of exposure
to excessive light.
Section 36—Precaution Against Dangerous Fumes:
In any factory, no person shall enter or be permitted to enter any chamber, tank, vat, pit,
pipe, flue or other confined space in which dangerous fumes are likely to be present to such
an extent as to involve risk of persons, unless it is provided with a manhole of adequate
M09_SING6013_01_C09.indd 174 6/15/10 3:05:20 PM

size or effective means of egress. Further, no person shall be required or allowed to enter
such a space unless all measures have been taken to remove all such noxious substances.
Persons entering such spaces need to have a written certificate from a competent author-
ity, to grant permission for the entry in such places based on a test carried out by self. In
such cases, workers must wear suitable breathing apparatus and the belt has to be securely
attached to a rope.
Section 36 A—Precautions Regarding the Use of Portable Light:
Section 36 A stipulates that no portable electric light or any other electric appliance of voltage
exceeding 24 volts shall be permitted for use inside any chamber, tank, vat, pit, pipe, flue or
any other confined space. Lamps and light of flame-proof construction only are permitted
for use in such cases.
Section 37—Explosive or Inflammable Dust, Gas, etc.:
In any factory, where any manufacturing process produces dust, gas, fume or vapour of such
character and to such extent as to be likely to explode on ignition, all practicable measures
shall be taken to prevent any such explosion by:
i) Effective enclosure or the plant of machinery used in the process
ii) Removal or prevention of the accumulation of such dust, gas, fume or vapour
iii) Exclusion or effective enclosure of all possible sources of ignition
Section 38—Precautions in Case of Fire:
This Section stipulates provision for means of escape in case of fire, exit doors to be con-
structed to open outwards, which should be easy to open and distinctly marked in a language
understood by all. Clearly audible warning alarms also need to be provided.
Section 39—Power to Require Specification of Defective Part or Tests of Stability:

The Inspector of Factories has been authorized with powers to seek drawings, specifications
and other particulars as may be necessary or to carry out such tests as prescribed in case any
part of building, machinery is in such condition that it may be dangerous.
Section 40—Safety of Buildings and Machinery:

In the event of the Inspector finding any machinery or plant in a factory to be in such a condi-
tion that it is dangerous to human life, he may serve on the occupier an order in writing, speci-
fying measures, which in his opinion should be adopted and carried out before a specific date.
Section 40 A—The Maintenance of Buildings:

In the event of the Inspector finding any machinery or plant in a factory to be in a state of
disrepair as is likely to lead to conditions detrimental to the health and welfare of workers,
he may serve a notice on the occupier specifying measures, which in his opinion need to be
taken within a specified date.
Section 40 B—Safety Officers:

Safety Officers are required to be appointed in every factory through a state-government-
gazette notification wherein:
i) One thousand or more workers are ordinarily employed
ii) Any manufacturing process or operation is carried on, which, in the opinion of the
state government, involves any risk of bodily injury, poisoning or disease, or any
hazard to health, to the persons employed in the factory.
Section 41—Grants Rule-making Power to States:

While it may not be necessary to know the detailed provision (we can always refer to the Act),
it is desirable that an overall understanding of safety provisions be there. Figure 9.4 gives a
big picture of the safety-related provisions of The Factories Act, 1948 (Chapter 4 of the Act,
Sections 21 to 41).
M09_SING6013_01_C09.indd 175 6/15/10 3:05:20 PM

Figure 9.4
Provisions relating to Fencing of M/C (21) Pits, Sumps, Openings (33)
safety.
M/C in Motion (22) Excessive Weights (34)
Dangerous M/C (23) Protection of Eyes (35)
Striking Gear and Power Cut-Off (24) Dangerous Fumes (36)
Self Acting M/C (25) Portable Lights (36A)
Casing of M/C (26) Explosives, Gases (37)
Safety
Chapter 4
Cotton Openers (27) Fire (38)
Hoists and Lifts (28) Specifications for Defective Parts (39)
Lifting M/C, Cranes, Ropes, Chains (29) Safety of Buildings and M/Cs (40)
Revolving M/C (30) Maintenance of Buildings (40A)
Pressure Plant (31) Safety Officers (40B)
Floors, Stairs (32) Rule-making Power (41)
HAZ AR D O US P R O C E SSE S. As mentioned earlier, Chapter 4A has been added

to The Factories Act to make provisions for factories employing hazardous processes. “Hazardous
process” has been defined in Section 2(cb) of the Act. In essence, it implies such processes
that may be carried out in an industry specified in Schedule 1 of the Act and the process may
cause one of the following two (or both):
i) Cause material impairment to the health of the persons engaged in or connected
with it
ii) Result in pollution of the general environment
The Bhopal Gas Tragedy was one of the reasons for special provisions being made for hazard-
ous processes.
Sections 41 A to 41 H have been added to Chapter 4A dealing with provisions for haz-
ardous process. The provisions, in brief, are as under:
Constitution of site appraisal committees (41A)
Compulsory disclosure of information by occupier (41B)
Specific responsibility of occupier in relation to hazardous process (41 C)
M09_SING6013_01_C09.indd 176 6/15/10 3:05:20 PM

Power of central government to appoint Inquiring Committee (41D)

Laying down emergency standards (41 E)
Prescribing permissible limits of exposure of toxic substances (41 F)
Workers’ participation in safety management (41 G)
Right of workers to warn about imminent danger (41 H)
WEL FARE P ROV ISIO NS. The welfare measures are contained in Chapter V of the
Act. The concept of welfare of industrial workmen has been espoused by ILO. The Industrial
Truce Resolution of 1947 also emphasized labour welfare to be essential for industrial peace.
Labour welfare, therefore, finds mention in the Constitution of India too. The Factories Act
has devoted one whole chapter to welfare provisions, in line with the ILO classification of the
welfare measures for industrial workers.
Welfare facilities within the factory premises are supposed to provide mental peace
to the workers so that they can devote their attention and energy to work at hand and not
on looking for such facilities. Though each provision has been discussed below briefly, the
student is advised to refer to the detailed and exact wording in the Bare Act. At the end, “a
big picture” of the welfare provision has been given in Figure 9.5 to aid easy understanding
and recall.
Section 42—Washing Facilities:

Clean and accessible washing facilities (separate and adequately screened for the use of male
and female workers) shall be provided and maintained for the use of workers.
Section 43—Facilities for Storing and Drying Clothing:

Provision of a suitable place for keeping clothes not worn during working hours and for dry-
ing of wet clothing, in respect of any factory or class of factories may be made based on rules
made in this regard by the state government.
Section 44—Facilities for Sitting:

In every factory, suitable arrangements for sitting shall be provided and maintained for all
workers who are obliged to work in a standing position. If workers engaged in a particular
manufacturing process or working in a particular room are able to do their work comfortably
in a sitting position, the Chief Inspector may require the occupier of the factory to provide
such seating arrangements, if practical.
Figure 9.5
Washing (42) Welfare provisions under
the Factories Act.
Storing and Drying (43)

Welfare Officers (49)
Crèche(48) Welfare Sitting (44)
Shelters, Rest First Aid (45)

Rooms (47)
Canteen
(46)
M09_SING6013_01_C09.indd 177 6/15/10 3:05:26 PM

Section 45—First-Aid Appliances:

In every factory, first-aid appliances or first-aid boxes or cupboards equipped with the pre-
scribed contents shall be provided and maintained so as to be readily available during all
working hours. The boxes so provided shall not be less than one for every 150 workers ordi-
narily employed.
Section 46—Canteens:
The state government is empowered to make rules requiring that in any specified factory
wherein more than 250 workers are ordinarily employed, a canteen or canteens shall be pro-
vided and maintained by the occupier for the use of workers. The state is also authorized to
prescribe standards of food items, charges and also infrastructure requirements and manage-
ment of the canteen.
Section 47—Shelters, Rest Rooms and Lunch Rooms:

In every factory, wherein more than 150 workers are ordinarily employed, adequate and suit-
able shelters or rest rooms and a suitable lunch room, with provisions of drinking water,
where workers can eat meals brought by them, shall be provided and maintained for the use
of the workers. But any canteen maintained in accordance with the provisions of Section 46
shall be regarded as part of the requirements of this sub-section, and where a lunch room
exists, no worker shall eat any food in the workroom.
Section 48—Crèches:
Every factory employing more than 30 women workers must provide and maintain a suit-
able room or rooms for children below 6 years of age. Such rooms shall be clean, adequately
lighted, ventilated and maintained in clean sanitary conditions, and be under the charge of a
woman trained in the care of infants.
Section 49—Welfare Officers:

In every factory, wherein 500 or more workers are ordinarily employed, the occupier
shall employ in the factory such number of welfare officers as may be prescribed. The
state government may prescribe the duties, qualification and conditions of service of such
officers.
Section 50:
This section empowers the state government to make rules regarding exemption of factories
from a few of the provisions subject to compliance with alternative provisions. It also empow-
ers the state government to make rules for the association of worker representatives to be
involved in the management of welfare arrangements.
Figure 9.5 gives an overview of the range of welfare amenities to be provided for in a
factory as per the Factories Act. Most of the modern manufacturing organizations have gone
much beyond the minimum requirements prescribed by the Act. Instead of the legal require-
ments, these organizations have taken an employee relations approach to proactively cater
to the needs of the employees. It is the unorganized sector and a few of the SMEs where the
statutory minimum is the benchmark.
WORKING HOURS, WEEKLY OFFS AND SPREAD-OVERS. Chapters VI, VII

and VIII contain provisions regarding regulation of work hours in a factory, weekly holi-
days, rest intervals between work, spread-over of working hours, employment of young
persons and annual leave. These provisions are meant to prevent exploitation and ensure
that excessive working hours are interspersed with adequate provisions for rest and holi-
days. These are very important provisions and there is currently a demand from indus-
try to provide more flexibility in working hours in a continuous process industry. On the
other hand, the government has proposed a few industries (e.g. the hotel industry) to be
brought under the purview of the Factories Act to better regulate the working hours of
the employees of this industry. The main provisions are explained below in a simple-to-
understand manner.
M09_SING6013_01_C09.indd 178 6/15/10 3:05:26 PM

Figure 9.6
Thursday
Weekly off shifted 2 days before The scheme of weekly
holidays under the
Friday Factories Act.
Saturday
First weekly off
Sunday
Monday
Sunday is the normal weekly off. In lieu of this normal weekly off, a
Tuesday worker can be given an off on the previous Thursday (one of the three
immediately preceding days). The next normal weekly off is the next
Wednesday Sunday. He can be given an off in lieu on the Wednesday following
the second weekly off (three days after). The worker will now have to
work for more than 10 days consecutively (Friday to Tuesday, i.e., 12
Thursday
days). This is not permissible.
Friday
Saturday
Sunday
Second weekly off
Monday
Weekly off shifted 2 days after
Tuesday
Wednesday
Weekly Hours (Section 51):

No adult worker shall be required or allowed to work in a factory for more than forty-eight
hours in a week.
Weekly Holidays (Section 52):

No adult worker shall be required or allowed to work in a factory on the first day of the week
(Sunday) unless given a full day’s holiday on one of the three days immediately before or after
the said day. This section also specifies that this substitution should not result in any worker
working for more than ten days consecutively without a holiday for a whole day. Figure 9.6
makes the scheme simple to understand.
Compensatory holidays (Section 53):

In case Section 52 is not applied on account of any exemption, a worker deprived of any of
the weekly holidays shall be allowed, within a month in which holidays were due to him or
within the two months immediately following that month, compensatory holidays of equal
number to the holidays so lost.
Daily Hours (Section 54):

No adult worker shall be required or allowed to work in a factory for more than nine hours
in any day.
Intervals for Rest (Section 55):

The periods of work of adult workers in a factory each day shall be so fixed that no period
shall exceed five hours and no worker shall work for more than five hours before he has had
an interval for rest of at least half an hour. The state government, however, is empowered to
exempt by a written order any factory from this provision only to the extent that the total
number of hours worked by a worker without an interval does not exceed six.
M09_SING6013_01_C09.indd 179 6/15/10 3:05:26 PM

Spread-over (Section 56):

The periods of work of an adult worker in a factory shall be so arranged that inclusive of his
intervals for rest, they shall not spread over more than ten and a half hours in any day. The
Chief Inspector may, however, increase the spread-over up to twelve hours by a special order
in writing.
In simple terms, “spread-over” means the total duration of time (hours of work plus
rest intervals). For example, a worker is asked to work from 8 a.m. to 12 p.m. and then again
from 3 p.m. to 7 p.m., i.e., a total of 8 working hours in a day. However, the spread-over in this
case is 11 hours (8 a.m. to 7p.m.). Even though the working hour and rest interval adhere to
the provisions of the Factories Act, the total spread-over exceeds the stipulation of ten and a
half hours.
Night Shifts (Section 57):
In case a worker in a factory works on a shift that extends beyond midnight, a holiday
for a whole day shall mean a period of 24 consecutive hours beginning when his shift
ends. The following day for him shall be deemed to be the period of 24 hours beginning
when such a shift ends, and the hours he has worked after midnight shall be counted in
the previous day.
If a worker has worked in a night shift from 10 p.m. to 6 a.m., the holiday for him will be
24 hours from 0600 hours and not from 0000 hours. There should be a clear 24-hour break
(at least) between the end of his shift and the beginning of the next shift after a holiday.
The Prohibition of Overlapping Shifts (Section 58):
Work shall not be carried on in any factory by means of a system of shifts so arranged that
more than one relay of workers is engaged in work of the same kind at the same time.
Extra Wages for Overtime (Section 59):
Where a worker works in a factory for more than nine hours in any day or for more than
forty-eight hours in any week, he shall in respect of overtime work, be entitled to wages at
the rate of twice his ordinary rate of wages. Ordinary rate of wages means basic wages plus
allowances. In case of piece-rated workers, the time rate shall be deemed to be equivalent to
the daily average of their full-time earnings.
Restriction on Double Employment (Section 60):
No adult worker shall be required or allowed to work in any factory on any day on which he
has already been working in any factory, save in such circumstances as may be prescribed.
Notice of Periods of Work for Adults (Section 61):
No worker shall be required or allowed to work in any factory other than in accordance with
the notice of periods of work for adults displayed in the factory and the entries made before-
hand against his name in the register for adult workers of the factory. Notice is to be dis-
played, regarding periods of work on a daily basis and shift systems planned for the week.
Section 64:
This Section restricts the total number of work hours in a week including overtime to 60 and the
total number of hours of overtime to 50 in a quarter. There is a demand from the industry to increase
the total overtime hour from 50 to 150 hours in a quarter in a continuous-process industry.
The Employment of Women and Young Persons:
There are specific restrictions on employment of women and young persons in a factory.
Women: The employment of women in any factory is restricted to timings between
6 a.m. and 7 p.m. Women are not to be deployed on night shifts. The provision made in this
section states that women cannot be exempted from the requirement that the maximum
working day for adults is nine hours, and cannot work in factories between 7 p.m. and 6 a.m.
(unless the factory falls within a specific exemption, but in any case, not between 10 p.m. and
5 a.m.). In relation to women, there must not be a change of shifts except after a weekly or
other holiday. Periods of absence on maternity leave are included in calculating periods of
service for the purposes of annual leave.
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Table 9.1
Item Provision Remarks
Provisions relating
Working hours/day 9 hours maximum Adult worker. Total working hours to working days and
holidays.
including overtime not to exceed
60 hours in a week.
Working hours/week 48 hours maximum Adult workers
Overtime Payable if Either of the two conditions.

working hours > 9 hours/day Subject to a maximum of 60
or 48 hours/week working hours in a week. Total
overtime not to exceed 50 hours in
a quarter.
Overtime rate Double the ordinary rate of

wages
Rest interval At least 30 minutes rest

after a maximum of
5 hours’ work
Spread-over 10.5 hours Extendable to 12 hours through

approval in writing
Women workers’ Not to be deployed between Unless there is an exemption, but

timings 7 p.m. and 6 a.m. in no case between 10 p.m. and
5 a.m.
Weekly off First day of the week Can be shifted to any of the
preceding or succeeding 3 days
subject to condition that there should
not be more than 10 working days
between 2 weekly offs
Annual leave with 1 day for every 20 days’
wages (earned work subject to a qualifying
leave) 240 days’ work in the
qualifying year
The Prohibition of Employment of Young Children (Section 67):

No child who has not completed his 14th year shall be required or allowed to work in any
factory.
Annual Leave with Wages (Section 79):
Every adult worker who has worked for a period of 240 days or more in a factory during a
calendar year shall be allowed during the subsequent calendar year one day of leave entitle-
ment for every 20 days of work.
Table 9.1 summarizes the provisions relating to working hours, holidays, annual leave with
wages, etc.
Conclusion:
The lacunae in The Factories Act can be related to its coverage as it does not have provision
for some important places of work such as hotels, hospitals, fire stations, and others where
serious health and safety risks may exist. Box 9.3 describes the government’s intention of
bringing the hotel industry within the definition of a factory. The process of automation
and the information technology revolution, which has resulted in computer-based produc-
tion methods, have totally transformed the workplace. Consequently, the role of labour
inspection has also changed and needs reorientation. Inspectors need additional skills and
M09_SING6013_01_C09.indd 181 6/15/10 3:05:27 PM

BOX 9.3 THE HOTEL INDUSTRY
The centre is considering to include the hotel industry under the Factories Act. A delegation
representing reputed hotels recently met the Labour Secretary to demand hotel industries
to be continued to be covered under the Shops and Establishments Act.
Hotels will have to change many rules once the industry is included under the Factories
Act. Rules like fixed shifts of eight hours would have to be in place and employers would
have to pay extra for overtime.
Hotels would also have to ensure health, safety and welfare facilities, employment of
young persons and annual leave with wages.
The central government maintains that “the industry needs to discipline themselves a
bit. It is about safety and security of people working in hotels. And that number is huge.”
Defaulters can face a maximum punishment of two years’ jail sentence or a fine of up
to Rs one lakh, or both.
The hotel industry maintains that there is no need to include it under the purview of
the Act, as high standards are already being maintained.
Adapted From: Press Trust of India, “Govt Sticks to Decision to Include Hotels Under
Factories Act”, Times of India, 17 February 2008.
expertise and a new approach when assessing and evaluating workplace conditions and haz-
ards. This has not yet happened in India. The second National Commission on Labour has
recommended the enactment of a general law relating to hours of work, working conditions,
annual leave, welfare, contract labour and others applicable to various categories of estab-
lishments alike.
The industry has called for “an urgent shift from a ‘persecution mind set’ to a ‘guidance-
oriented mindset’ to free the domestic manufacturing sector from the clutches of the
‘Inspector Raj’. The industry has sought amendments to the Factories Act to make the
licence-renewal requirement once in three years, inspections once in two years, easing
of the restricted number of working hours, self-certification and prosecution only in
case of glaring evidence of management callousness”1. There appears to be a case for
thorough discussion and review since the law was enacted in 1948, where the ground
realities and priorities have undergone a sea change with issues such as competitiveness,
productivity, quality, change management, work–life balance, safety, health and environ-
ment, and human development coming to the fore.
9.4 The Shops and Establishments

Act, 1953
The Shops and Establishments Act is a state legislation. Each state frames its own rules for
the Act. The object of this Act is to provide statutory obligation and rights to employees and
employers in the unorganized sector of employment, i.e., shops and establishments. A barber
shop, a general store, corporate office of a company (not located within the manufacturing
premises), etc. are all examples of shops and establishments. Since every state has its own
enactment, it may not be practical to cover all of them. However, each of the Acts has certain
common features. The explanation below is based on the common elements. These elements,
state-wise, have minor variations.
9.4.1 Objectives
The objectives are to provide statutory obligation and rights to employees and employers in
the unorganized sector of employment, i.e., shops and establishments.
M09_SING6013_01_C09.indd 182 6/15/10 3:05:27 PM


It is a state legislation; each state has framed its own rules for the Act. It is applicable to all
persons employed in an establishment with or without wages, except the members of the
employer’s family.

Under this Act, registration of shop/establishment is necessary within 30 days of commence-
ment of work. Fifteen days of notice is required to be served before the closing of the estab-
lishment. In the main, the Act stipulates the following:
Compulsory registration of shop/establishment within 30 days of commencement of
work
Communications of closure of the establishment within 15 days from the closing of
the establishment
Hours of work per day and week
Guidelines for spread-over, rest interval, opening and closing hours, closed days,
national and religious holidays, and overtime work
Rules for employment of children, young persons and women
Rules for annual leave, maternity leave, sickness and casual leave, etc.
Rules for employment and termination of service
Maintenance of registers and records and display of notices
Obligations of employers
Obligations of employees
It can be seen that the S&E Act is for shops and establishments what the Factories Act is for
manufacturing concerns.
THE REG IST RAT IO N O F AN E STABLI SH M E NT. To register the estab-

lishment under the Shops and Establishments Act, certain documentary evidence in respect
of rightful possession/occupation of the premises of the establishment needs to be obtained as
prescribed under the Act. The following need to be kept in mind while seeking registration:
The application for the registration of an establishment is not accepted prior to the
commencement of business.
The employer is obliged to get the establishment registered within 30 days from the
date of commencement of his business by sending to the Inspector of his area an
application with a statement in the prescribed form along with the requisite fees.
This is merely a Registration Certificate and not a licence, and does not by itself
bestow any legality on the structure in which the shop/commercial establishment is
located.
RESTRICTIONS ON WORKING HOURS OF EMPLOYEES IN SHOPS

A ND ESTABL ISHM ENT S. The main restrictive provisions of the Act about the
working hours of employees in shops and commercial establishment are as follows:
a) The general rule about the opening hours of shops is that they are not allowed to be
opened earlier than 7 a.m. But shops selling such goods as milk, vegetable and fish.
are allowed to be open from 5 a.m. onward. The exact timings, however, vary from
state to state.
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b) This general rule about the closing hours of shops is that they must be closed at the
latest by 8.30 p.m. But shops selling goods such as pan and beedi are allowed to be
kept open up to 11 p.m.
c) Commercial establishments are not allowed to be opened earlier than 8.30 a.m. and
closed later than 8.30 p.m. in a day
d) An employee in a shop or commercial establishment cannot be required or allowed
to work for more than 9 hours in a day and 48 hours in a week.
e) He/she must be allowed an interval of rest of at least one hour after five hours of
continuous work.
f) Spread-over cannot exceed 11 hours in a day.
g) Every shop and commercial establishment must remain closed on one day of the
week. No deduction can be made from the wages of any employee in a shop or com-
mercial establishment on account of any day on which it has so remained closed.
Interestingly, most state governments have registered IT and ITES companies as public util-
ity services and these have got exemption from some of the provisions of The Shops and
Establishments Act. The new economy businesses have brought in different work practices such
as 24 7 customer services and round-the-clock operations. The Shops and Establishments
Act, like many other pieces of labour legislation, may need a review to keep up with the times
from both labour and business point of view. Recently, a few call centres in Haryana got
notices in terms of provisions of the Punjab Shops and Establishments Acts invoking the pro-
vision of non-deployment of women in the night shift where almost 50 per cent of employees
in these call centres were women. On the other hand, inadequate security for employees has
led to mishaps in Delhi and Bangalore, when women employees were being dropped home
after performing duties late at night.
9.5 The Contract Labour (Regulation

and Abolition) Act, 1970
The government has been concerned about the exploitation of workers under the contract
labour system. With a view to removing the difficulties of contract labour and bearing in
mind the recommendations of various commissions and committees and the decisions of the
Supreme Court, the Contract Labour (Regulation and Abolition) Act was enacted in 1970.
This Act seeks to regulate the employment of contract labour in certain establishments and
to provide for its abolition under certain circumstances.
Contract labour, by and large, is neither borne on pay roll or muster roll, nor is paid
wages directly. The establishments, which farm out work to contractors, do not own any
direct responsibility in regard to their labourers. Generally, the wage rates to be paid and the
observance of working conditions are stipulated in agreements, but in practice, they are not
strictly adhered to.
9.5.1 Objectives
The objectives of the Act are to:
i) Abolish the system of contract labour wherever possible and practicable
ii) Improve service conditions of contract labour where abolition of the contract labour
was not possible
iii) Regulate the working conditions of the contract labour so as to place it at par with
labour employed directly
iv) Ensure timely payment of wages and provision of essential amenities
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The Act applies to every establishment/contractor in which 20 or more workmen are employed
or were employed on any day in the preceding 12 months as contract labour and to every
contractor who employs or who employed on any day of the preceding 12 months, 20 or more
workmen. It does not apply to establishments where the work performed is of intermittent or
seasonal nature. An establishment, wherein work is of intermittent and seasonal nature, will be
covered by the Act if the work performed is more than 120 days and 60 days in a year respec-
tively. The Act also applies to establishments of the government and local authorities as well.
9.5.3 Definitions
Principal Employer: The manager or occupier of a factory or head of the department of a
government/local authority [Section 2(1) (g)].
Contract Labour: A workman is deemed to be employed as “contract labour” in or in rela-
tion to work of the establishment, if he/she is hired for such work by or through a contractor,
with or without knowledge of the principal employer. [Section 2(1) (b)].
Appropriate Government: The jurisdiction of the central and state government has been laid
down by the definition of the “appropriate government” in Section 2(1)(a) of the Act, as amended
in 1986. The appropriate government, in respect of an establishment under the Contract Labour
(Regulation and Abolition) Act, 1970 is the same as that in the Industrial Disputes Act, 1947.
Controlled Industry: Any industry the control of which by the union has been declared by
any central Act to be expedient in public interest
Establishment: (i) Any office or department of the government or a local authority or (ii) any
place where any industry, trade, business, manufacture or occupation is carried on.
9.5.4 Registration and Licensing

The establishments covered under the Act are required to be registered as principal employ-
ers with the appropriate authorities. Every contractor is required to obtain a licence and not
to undertake or execute any work through contract labour, except under and in accordance
with the licence issued in that behalf by the licensing officer. The licence granted is subject
to conditions relating to hours of work, fixation of wages and other essential amenities in
respect of contract as prescribed in the rules.
9.5.5 Duties of the Controlling Authorities

Control over contract labour will be exercised by the “appropriate government”. An appropri-
ate government means the central government in case of railways, docks, IFCI, ESIC, LIC,
ONGC, UTI, Airport Authority, industry carried on by or under authority of central govern-
ment. It would be the state in case of other industrial disputes [Section 2(1)(a)]. An appropri-
ate government can make rules. It will appoint inspecting staff to ensure that the provisions of
the Act are being followed (Section 28). The principal employer should maintain a register of
contractors in the prescribed form (Section 29). He is required to ensure that the contractor
makes adequate provision for canteen, rest rooms, supply of drinking water, latrines, urinals,
wash rooms, etc. to a contract labour. If the contractor fails to do so within the prescribed
time, the principal employer shall provide the amenities, and can recover from contractor the
cost incurred by him in providing these amenities (Section 20).
What happens if an inspector finds a contract labour working within a factory premise,
which is not “registered” under the Contract Labour (R&A) Act, 1970?
Further, he finds that the “contractor” has not obtained a “licence”. What would be
the implications for the “principal employer”?
M09_SING6013_01_C09.indd 185 6/15/10 3:05:28 PM

9.5.6 Duties of Contractors

The Act applies to every contractor who employs 20 or more workmen [Section 1(3)(b)].
The contractor shall be licensed (Section 12). The contractor is required to maintain muster
roll and register of wages (Section 29). He is required to follow other provisions as may be
contained in rules made by the appropriate government. The contractor is required to pay
wages to workmen on time, in the presence of an authorized representative of the principal
employer (Section 21). He should issue wage slips to a workman and obtain signature or
thumb impression on the wage register. If the contractor fails to make payment of wages, the
principal employer is liable to make payment of wages to the contract labour. He can recover
this amount from the contractor [Section 21(4)]. The contractor is required to provide can-
teen facilities, first-aid, rest rooms, drinking water, latrines and washing facilities, as per rules
made by the state government (Section 16 and 17).
O B L I G AT I O N S O F A C O N T R A C TO R
a) Grievance handling of contract labour must be done by the contractor only.
b) If the contractor has similar types of contracts in different concerns, then he should
try to transfer the employees from one establishment to another establishment.
c) The contractor shall select and appoint the workmen without any interference of the
principal employer.
d) The contractor shall determine the mode, method and manner of working. The
principal employer shall not interfere in regard to the same.
e) The contractor shall employ the workforce, according to his requirement, but he
shall not in any case exceed the number of workmen shown in the licence.
f) The contractor shall submit monthly printed bill to the company for payment of the
work done by him by the 1st day of the following month.
g) The contractor should pay the wages to his workmen in the presence of the repre-
sentatives of the company who shall also sign on the muster.
h) The contractor shall pay his own taxes as per the provisions of statutory Act.
i) Every contractor shall send a half-yearly return to the licensing officer within
30 days of the close of the half-year.
Obligations of a
Contractor
9.5.7 Duties of the Principal Employer
9
Grievance handling of
contract labour The principal employer shall make an application to the registration officer of the area where
Administrative control tthe establishment is situated. Every contractor to whom the Act applies is required to obtain a
over labour without llicence. An application will be made in Form IV to the licensing officer of the area where the
interference from the eestablishment is located. The application will be accompanied by a certificate of the principal
principal employer. e
employer to the effect that the applicant has been employed by him as a contractor in relation
Should not employ to t the establishment. The licence will be granted in Form VI and has validity of one year from
more labour than what
thet date it is granted or renewed. Please note that for each “contract”, a separate application
has been allowed in
the license hash to be made even if the principal employer is the same.
Shall pay wages in the
presence of the PE’s
representative O B L I G AT I O N S O F T H E P R I N C I PA L E M P LOY E R
Submit half-yearly The employer has to ensure that the contractor is paying wages to his workmen before
returns to the licensing
expiry of the seventh day of every month if the number of workers employed in the
officer
company does not exceed a thousand, or before the expiry of the tenth day of every
Pay taxes as per statu-
tory provisions month if the number of workers employed in such Company are more than
one thousand.
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Also, the employer has to ensure that minimum wages are paid to contract labour.
Obligations of the PE
The principal employer shall pay wages in full to the contract workmen in case the Ensure that the con-
contractor fails to pay the same. tractor is paying wages
to his workmen
The principal employer has a statutory obligation for the payment of wages to con-
Ensure that minimum
tract labourers including arrears, in case the contractor commits default, which he wages are paid
can recover from the contractor by deducting from any amount payable to him or as Pay wages in full to
debt payable to him or as debt payable by him. the contract workmen
in case the contractor
The Act stipulates the obligation of the principal employer and the contractor employ- fails to pay the same,
ing contract labour to provide canteens facilities. In case of failure on the part of the which he can recover
contractor to provide such facilities, the principal employer is made liable to provide from the contractor
the amenities. Ensure that the con-
tractor has paid the PF
The principal employer shall ensure while making payment to the contractor that the and ESI dues
contractor has paid the employees’ provident fund and ESI contributions deductions Ensure provision of
both of the contractor and employees on time. amenities as provided
for in the Act
The Act enjoins obligation on every principal employer and every contractor to main- File annual returns to
tain the registers and records. RO.
The principal employer shall send the return annually so that it reaches the registering
officer not later than 15th of February following the end of the year to which it relates.
9.5.8 The Engagement of Contract Labour

Contract labour may be engaged for the following reasons:
a) For seasonal/occasional requirement/temporary increase of work
b) Need of expertise in a particular job
c) Economic and financial feasibility
9.5.9 The Prohibition of Employment of Contract Labour

Areas where contract labour should not be engaged:
i) All such jobs as notified by the appropriate government
ii) All processes, operations and other work incidental to, or necessary for, the indus-
try, trade, business, manufacture, or occupation are carried on in the establishment
for jobs of perennial nature, that is to say, of sufficient duration
iii) Jobs done ordinarily through regular workmen in the establishment
Apart from the regulatory measures provided under the Act for the benefit of contract
labour, the appropriate government under Section 10 (1) of the Act is authorized, after con-
sultation with the Central Board or State Board, as the case may be, to prohibit, by notifi-
cation in the official gazette, employment of contract labour in any establishment in any
process, operation or other work. This is one of the most controversial sections of the Act.
It lays down sufficient guidelines for deciding upon the abolition of contract labour in any
process, operation or other work in any establishment. The guidelines are mandatory in
nature and are as follows:
Conditions of work and benefits provided to the contract labour
Whether the work is of a perennial nature
Whether the work is incidental or necessary for the work of an establishment
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Whether the work is sufficient to employ a considerable number of whole-time

workmen
Whether the work is being done ordinarily through regular workmen in that estab-
lishment or a similar establishment
The central government, on the recommendations of the Central Advisory Contract Labour
Board, has prohibited the employment of contract labour in various operations/category of
jobs in various establishments. So far, 73 notifications have been issued since the inception
of the Act.
Guidelines for the 9.5.10 The Central and State Advisory Boards
9
Prohibition/Abolition The central government and state governments are required to set up Central and State
of Contract Labour
Deployment Advisory Contract Labour Boards to advise the respective governments on matters arising
A
out of the administration of the Act as are referred to them. The Boards are authorized to
o
Work is of “perennial” cconstitute committees as deemed proper. The Central and State Contract Labour Boards are
nature
Work is incidental to ttripartite bodies comprising members from employers, employees and the government. The
or necessary for the work Central Advisory Board comprises a Chairman (appointed by the Central Government), a
C
of the establishment Chief Labour Commissioner (ex-officio) and 11–17 members representing employers, con-
C
There is sufficient work ttractors and workmen. The composition must be such that the number of workmen repre-
to employ sufficient num- ssentatives is not fewer than the number of representatives of employers and contractors. The
ber of whole-time workers
Where a particular SState Advisory Board is constituted along similar lines with the number of members ranging
work is ordinarily being ffrom 9 to 11. Among other things, the Boards make recommendations for abolition (or oth-
done through regular eerwise) of contract labour in certain jobs.
workmen
Where conditions of
work and benefits for the 9.5.11 Facilities for Contract Labour
9
contract labour are not
alright The Act has laid down certain amenities to be provided by the contractor to the contract
llabour for the establishment of canteens and rest rooms, latrines and urinals, washing facili-
tties and first-aid facilities and arrangements for sufficient supply of wholesome drinking
water have been made obligatory. In case of failure on the part of the contractor to provide
these facilities, the principal employer is liable to provide the same.
9.5.12 Payment of Wages

The contractor is required to pay wages and a duty is cast on him to ensure disbursement
of wages in the presence of the authorized representative of the principal employer. In
case of failure on the part of the contractor to pay wages either in part or in full, the prin-
cipal employer is liable to pay the same. The contract labour, who performs the same or
similar kind of work as regular workmen, will be entitled to the same wages and service
conditions as regular workmen as per the Contract Labour (Regulation and Abolition)
Central Rules, 1971.
9.5.13 Other Laws Applicable to Contract Labour

Besides the Contract Labour (Regulation and Abolition) Act, various other Acts are appli-
cable to contract labour—(a) the Factories Act: The Act makes no distinction between per-
sons directly employed and employed through a contractor; (b) Employees’ Provident Funds
Act; (c) ESIC; (d) the Payment of Wages Act; (e) the Minimum Wages Act; (f) the Industrial
Disputes Act; and (g) the Workmen’s Compensation Act.
In India, contracting out various items of work to workers or to contractors has been
common and wide-spread. Governments are the biggest contract-labour-employing agen-
cies. Public and private sectors extensively use the services of contractors and in turn their
workers. The engagement of contract labour provides flexibility, leads to efficient utilization
of resources and improves productivity. Considering the need to regulate such employment
M09_SING6013_01_C09.indd 188 6/15/10 3:05:28 PM

and protect the interests of the workers, the Government of India brought in Contract Labour
(Regulation and Abolition) Act, 1970.
This Act not only seeks to regulate the contract labour but provides for the abolition of
industries where the nature of work is perennial.
Even though this Act has been in force for more than 35 years, its enforcement is far
from satisfactory and has led to enormous litigation. The enforcement machinery is preoc-
cupied more with the activity of abolition rather than regulation. The pressure on the public
enterprises, the railways and the government, to abolish the contract labour and provide
regular and permanent employment to the workers is much greater as compared to cases
where private industry is involved.
Various judicial pronouncements in regard to the Contract Labour (R&A) Act, 1970,
have made things much more difficult for the employers. Often, trade unions, working in tan-
dem with the enforcement machinery, have harassed the employers and burdened them with
manpower they do not need. With the globalization of business and trade, there is increasing
competition among nations and industrial groups. In order to compete, it is important to
streamline the operations and produce goods and services most efficiently and at the least
cost. It is recognized widely that the enterprises should focus on their core activities and
the rest be left to the agencies and outfits that can undertake the peripheral activities more
efficiently and economically. Out-sourcing of various goods and services is the inevitable
outcome. In this context, the engagement of contract workers, directly or through contrac-
tors, has not only assumed importance but is crucial. This has also attracted the attention of
International Labour Organization with a view to regulate the same.
Most of the employers have demanded that the stringent provisions of the Act should be
made easy so that the engagement of contract labour in certain areas where deployment of
regular workers is not feasible or economical is not affected. The judicial pronouncement of
the Supreme Court in Air India Corporations case places a heavy burden on the employers,
which may affect the economic viability of industries. In view of changed scenario as a result
of economic liberalization, there is a need to allow the industries to employ contract labour
in support and peripheral services so that the industries can concentrate on core activities.
Provisions of the Contract Labour (R&A) Act need to be amended suitably so that the appro-
priate government is empowered to withdraw, abrogate, and modify its own notification issued
under Section 10, enabling industries to function with economic viability and greater com-
petitiveness. The employers have been seeking a complete review of the Act and requesting the
government to regulate contract labour and not abolish it. While employers want flexibility,
the workers need security. If our industry and trade have to have the competitive edge in the
international market, there should be flexibility in the labour market. The background in which
the Act was promulgated has since undergone a complete change. Therefore, there is adequate
justification for a complete review of the legislation and bringing out a new piece of legislation,
which would provide the needs of both the employers and the workers in a balanced way.
SUMMARY
The Factories Act, 1948 The Act does not permit the employment of women and young
persons in a dangerous process or operation.
The Factories Act, 1948 is the principal legislation, which
governs the health, safety, and welfare of workers in There is provision for one weekly holiday, and an adult
factories. worker should work not more than 48 hours in a week.
The Act extends to the whole of India. Mine and railway work- There is at least half-an-hour rest after a stretch of five hours
ers are not included as they are covered by separate Acts. of continuous work.
However, it was not until 1987 that the elements of No women should be employed between 7 p.m. and 6 a.m.
occupational health and safety, and the prevention and
No person less than 14 years of age should work in the fac-
protection of workers employed in hazardous processes,
tory. No child should work for more than 4 hours a day and
got truly incorporated in the Act (after the Bhopal Gas
should not work in the night between 10 p.m. and 6 a.m.
Tragedy).
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One full-wage leave should be given to an adult worker for applies to establishments of the government and local
every 20 days of work and one for every 15 days to the child authorities as well.
worker. Twelve weeks of maternity leave should be given to a
The central government and the state governments are
woman.
required to set up Central Advisory Board and State
The Shops and Establishments Act Advisory Boards, which are authorized to constitute com-
mittees as deemed proper. The Boards carry out the func-
The Shops and Establishments Act, 1953 was enacted to
tions assigned to them under the Act.
provide statutory obligation and rights to employees and
employers in the unorganized sector of employment, i.e., The establishments covered under the Act are required to be
shops and establishments. registered as the principal employer. Likewise, every contrac-
tor to whom the Act applies is required to obtain a licence
It is applicable to all persons employed in an establishment
and not to undertake or execute any work through contract
with or without wages, except the members of the employer’s
labour except under and in accordance with the licence
family.
issued.
It is a state legislation and each state has framed its own rules
The Act has provided for the establishment of canteens. For
for the Act.
the welfare and health of contract labour, provision is made
The state government can exempt, either permanently or for for restrooms, first-aid, wholesome drinking water, latrines
a specified period, any establishments from all or any provi- and urinals. In case of failure on the part of the contractor to
sions of this Act. provide such facilities, the principal employer is made liable
to provide the amenities.
The Act provides for compulsory registration of shop/estab-
lishment within 30 days of commencement of work and all The contractor is required to pay wages and a duty is cast on
communications of closure of an establishment within 15 him to ensure disbursement of wages in the presence of an
days from its closing. authorized representative of the principal employer. In case of
failure on the part of the contractor to pay wages either in part
It also lays down the hours of work per day and week as well
or in full, the principal employer is liable to pay the same. In
as the guidelines for spread-over, rest interval, opening and
case the contract labour perform same or similar kind of work
closing hours, closed days, national and religious holidays,
as regular workmen, they will be entitled to the same wages
overtime work, etc.
and service conditions as regular workmen as per the Contract
The Contract Labour (R&A) Act, 1970 Labour (Regulation and Abolition) Central Rules, 1971.
The Contract Labour (Regulation and Abolition) Act, 1970 The appropriate government under Section 10 (1) of the Act
applies to every establishment in which 20 or more workmen is authorized, after consultation with the Central Board or
are employed or were employed on any day on the preced- State Board, as the case may be, to prohibit, by notification
ing 12 months as contract labour and to every contractor in the official gazette, employment of contract labour in any
who employs or who employed on any day of the preceding establishment in any process, operation or other work.
12 months 20 or more workmen.
The Act lays down sufficient guidelines for deciding upon
It does not apply to establishments where the work per- the abolition of contract labour in any process, operation or
formed is of intermittent or casual nature. The Act also other work in any establishment.
KEY TERMS
Factories Act 163 factories 165 worker 164
occupier 168
REVIEW QUESTIONS
1 Discuss the important provisions of the Factories Act, 1948. 3 Does the Factories Act, 1948 apply to factories belong-
ing to the central government? Give reasons for your
2 What do you understand by the terms “worker”, “manufac-
answer.
turing process” and “factory” under the Factories Act?
M09_SING6013_01_C09.indd 190 6/15/10 3:05:29 PM

4 What do you understand by a “young person”? Distinguish 10 How can a shop or establishment get an exemption under
between “adult” and “adolescent” as defined in the Factories this Act?
Act, 1948.
11 Define the object of the Contract Labour (R&A) Act, 1970.
5 What are the working hours for children and women in a
12 Explain the following terms used in the Contract Labour
factory? Under the Factories Act, 1948, what are the main
(R&A) Act:
provisions of restrictions regarding the employment of
young persons? How should the register of child workers be a. Appropriate government
maintained in a factory?
b. Contractor
6 What are the weekly and the daily hours for which an
c. Contract labour
adult worker may be required or allowed to work in a
factory? d. Principal employer
7 What are the basic objectives of The Shops and 13 When is registration of an establishment obligatory under
Establishments Act? the Contract Labour (R&A) Act?
8 Discuss some of the restrictions imposed on hours of work 14 What is the procedure followed for the abolition of contract
with regard to employees governed under the S&E Act. labour in any process, operation or any other work in an
establishment?
9 Is it necessary for an employer to notify the closing of his
establishment under the S&E Act?

1 Employers through their federations have been seeking i. What could be the implications of this provision?
amendments to some of the provisions to The Factories
ii. How do you think the BPO industry has managed to
Act. One of them is to raise the total number of hours of
circumvent these provisions?
overtime of workers from 50 to 150 (in a quarter) for a
continuous process industry and also that the rate of over- 4 Services in the information technology (IT) and IT-related
time should be the same as ordinary rate of wages instead sectors are being brought under the ambit of the Contract
of the existing twice the ordinary rate. Do you agree? Give Labour (R&A) Act. In these sectors, a lot of non-core activi-
reasons. ties are outsourced. What would be the implications of such
a move.?
2 A recent report said that “hotels will be classified as
‘factories’ and the definition of a ‘hazardous industry’ 5 Given below are some of the jobs that are of perennial
will be substantially broad-based if amendments pro- nature, and organizations are deploying contract labour for
posed to the Factories Act of 1948 come through.” What these jobs/activities:
could be the possible implications of this move? Will it
sweeping, cleaning, dusting and the collection and dis-
be good or bad for business? Will it be good or bad for
posal of all kinds of wastes
the employees?
security services
3 According to provisions of The Delhi Shops and
Establishments Act, women employees are not allowed to courier services
work overnight and also those working on holidays are
maintenance, service and repair of equipment/machines
entitled to double wages and compensatory leave. Section 14
of the Delhi Shops and Establishments Act says, “no young loading and unloading of materials
person or woman shall be allowed, or required to work,
running canteen services
whether as an employee or otherwise, in any establishment
between 9 p.m. and 7 a.m. during the summer season and house-keeping and laundry services
between 8 p.m. and 8 a.m. during the winter season”. This
Do you think the government will allow registration of these
provision, however, grants exemptions to air services compa-
establishments under the Contract Labour (R&A) Act? Why?
nies, cloak-room attendants, girl telephone operators, ayaas,
lady house keepers and artists in cabaret and entertainment 6 In the context of globalization, many clichéd terms such as
shows except children in hotels, theatres and other places of “global quality” and “global competition” are being increas-
public amusement. ingly used. But what is being lost sight of is that global
M09_SING6013_01_C09.indd 191 6/15/10 3:05:29 PM

competitiveness is achievable only if certain global bench- advantage of outsourcing non-core activities to contractors is
marks in relation to running of the business are also consid- lost under the provisions of the Contract Labour (Regulation
ered and accorded due importance. One such benchmark and Abolition) Act, 1970. Critically examine this statement
is the linking of productivity to man power. Over-staffing in light of the current reality of the Indian industry and
is something that no industry can afford. The practical provisions of the Contract Labour (R&A) Act, 1970.
D E B AT E
1 The second National Commission on Labour has recom- The IT industry and hospitals, however, will be exempted.
mended the enactment of a general law relating to hours of Women’s groups are already protesting saying this is not a
work, working conditions, annual leave, welfare, contract progressive step. It may hinder progress of women, they say.
labour and others applicable to various categories of estab- The employers say that in the world of business today one
lishments alike. In a competitive environment, such provi- cannot have a segregated and isolated approach towards
sions would further erode the competitiveness of Indian women workforce.
business.
The government says it is the only way to ensure protec-
2 Is the Shops and Establishments Act, as it obtains today, an tion for women and will target the hotel industry, shopping
impediment to 24 7 customer service? malls and recreation centres. The recent incident of the
murder of a woman employee returning from late night
3 Read the box-item below. What could be the arguments
shift has prompted government concerns regarding wom-
from each side?
en’s safety.
The Karnakata government’s plan to ban night shifts for
4 Rather than abolish contract labour, we need to regulate it by
women is ruffling feathers in Bangalore.
protecting equality of wages, workers’ health, safety, welfare
Women employees in the hotel Industry have to work late and access to various amenities at the workplace.
night shifts. And the number is substantial. But that might
5 Trade unions and workers’ organizations can focus on “equal
soon change. The Karnataka Assembly has passed a new Bill
pay for equal work”, rather than on the absorption of con-
that seeks to ban night shifts for women in firms that come
tract labour.
under the Karnataka Shops and Establishments Act.
Shifting of Weekly Off (Factories Act): allowing employers to keep their shops opened 24 7, only if
they strictly adhere to labour laws. “They must follow the laws
MK Manufacturers Ltd decided to shift their weekly off to
so far as following the outer limit for working hours in a week.
Tuesday. The daily normal working hours of the workmen are
They must give wage for extra time as laid down in the laws. At
8 hours on all days except Sunday, when working hours are
any cost, no employee should be exploited. In those conditions
4-3/4 hours only. Thus, the total working hours during the
we can relax the opening of shops.”
week comes to 44-3/4 hours. If piece rated workers were
required to work beyond the aforesaid normal working hours, “This is a conscious decision. The earlier proposal of clos-
they were not given overtime payment for work up to 48 hours ing shops on Sunday was opposed by the stakeholders as
in a week. Overtime was paid only beyond the 48 hours in a they argued that their sale is much better on official holidays.
week. Hence, from now onwards, our officials will initiate action
1. Is this a contravention to the provisions in The Factories Act? against the violators,” he said. “If the employers feel that
Gurgaon is recognized globally, the citizens must follow the
2. Is the overtime payment justified? best practices,” the Labour Commissioner said. He said this
Shifting of Weekly Off (Shops and Establishments Act)2: move is aimed at regulating the working of shops and not to
discourage them.
In February, 2008, the Haryana government’s labour depart-
ment has notified the closing of all shops in the city on Discuss the above decision with respect to the provisions of
Tuesdays. This implies that the largely unorganized, semi-skilled The Shops and Establishments Act. In case some shopkeep-
and unskilled workers employed in many shops and malls in ers decide to keep their shops open on Tuesdays, what are
Gurgaon will get their weekly off on Tuesdays. However, the their obligations towards the employees? What are the likely
labour commissioner stated that that they would not mind restrictions?
M09_SING6013_01_C09.indd 192 6/15/10 3:05:29 PM

The Absorption of Contract Labour: Due to intense pressure from the union, the management
worked out a voluntary-retirement scheme for contract work-
JNK Plastics Ltd had been employing contract labour for
men, which were settled through a tripartite agreement. Forty
loading and unloading of materials and finished goods on a
per cent of the burden is being funded by the management out
regular basis. The contracts for this job were based on ten-
of its welfare fund.
der invitations for job contracts, and for the past five years,
the same contractor has been awarded the job. This year, a Bring out the legal as well as industrial relations issues in the
mechanized system of loading has been introduced, which has above case. Discuss the strategy adopted by the management
done away with the need of contract labour. The union has within the constraints of law. Could there have been a better
been putting pressure on the management for absorption of strategy?
the labour and deploying them on unskilled-level jobs in the
manufacturing unit.
NOTES
1 Bureau, “Industry Calls for Changes in Factory Act, Labour 2 Times News Network, “Thank God it’s Tuesday in Gurgaon”,
Laws”, The Hindu Business Line, 6 December 2004. The Times of India, 3 March, 2008.
M09_SING6013_01_C09.indd 193 6/15/10 3:05:29 PM

chapter ten
10.1 Major Legislations After reading this chapter, you will be able to:
10.2 The Employees’ State Insurance Act, • Understand the concept of social security
1948 • List the major central legislations pertaining
10.3 Maternity Benefit Act, 1961 to social security
10.4 The Workmen’s Compensation Act, 1923 • Describe the major benefits and provisions
10.5 The Payment of Gratuity Act, 1972 of these legislations
10.6 Employees’ Provident Funds and • Explain the role of the government,
Miscellaneous Provisions Act, 1952 employer and employees in the
implementation of social-security measures
An Accident at the Workplace

Badrinath, a senior machinist with one of the major auto ancillaries in Gurgaon, liked to be punctual. No matter how
troublesome the 15-km ride to the factory was, Badrinath made it a point to be on time. Of course, putting his two children
through school meant that he needed every paisa of his salary each month. Badrinath had his priorities sorted out—good
education for his children and a good standard of living for his family. Saving for a rainy day did not feature on his priority
list. He was not unduly worried about his job. He was a skilled machinist in a market where trained local technicians were
in short supply and the employers were many. Confident of his own professional abilities, Badrinath figured that the need
to save for old age was still distant.
On the morning of that fateful day, Badrinath punched his card in the office at 0730 hours in the general shift, as was his
wont. He immediately reported to the shop floor. Striding towards bay number 5, Badrinath, through his peripheral vision,
vaguely sensed something rushing towards him. Before he could react, it hit him hard on the right side causing him to fall
down. A momentary sense of excruciating pain was followed by numbness. Badrinath, lying crumpled on the floor, could
see all the workers rushing towards him but he could not move at all—not even his neck. His vision faded as he slipped into
unconsciousness.
Eyewitnesses of the accident described to the doctor that the tyre of the heavy dumper crushed his right leg and hit his back,
probably damaging the backbone as well. The immediate medical attention that Badrinath received from the hospital he
was rushed to could do no more than merely save his life. Badrinath—completely paralysed below his neck—had become a
living vegetable with little or no hope of either recovering or finding gainful employment in the future.
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Social-security Legislations
Social security is one of the key components of labour welfare. Labour welfare refers to all such services,
amenities and facilities to the employees that improve their working conditions as well as their standard of
living. Social security benefits provided by an enterprise should protect not only their employees but also
their family members through financial security including healthcare. Social security envisages that the
employees shall be protected against all types of social risks that may cause undue hardships to them in
fulfilling their basic needs.
What would be the fate of the likes of Badrinath (and dependants) for the rest of their lives?
Such accidents in the course of employment do happen more frequently than we would like to
imagine.
Accidents, job losses, retirement, sickness, death while on duty—these are realities of work-
ing life and leave a person and/or his dependants vulnerable. Social security is an attempt by the
employer and the State to institute measures that mitigate such social risks. The concept of social
security, though old, was first enacted in the last century in the USA during the 1930s at the time
of Great Depression. In India, too, there have been attempts to institute social-security measures in
place even though it is still at a nascent stage.
10.1 Major Legislations

India, being a welfare State, has taken upon itself the responsibilities of extending various ben-
efits of social security and social assistance to its citizens. The social-security legislations in
India derive their strength and spirit from the Directive Principles of the State Policy as con-
tained in the Constitution of India. Although the Constitution of India is yet to recognize social
security as a fundamental right, it does require the State to promote the welfare of the people by
securing and protecting a social order in which justice—social, economic and political—shall
prevail in the institutions of national life. Article 41 of the Constitution requires that the State
should, within the limits of its economic capacity, make effective provisions for securing the
right to work, to education and to public assistance in case of unemployment, old age, sickness
and disablement. While Article 42 requires that the State should make provisions for securing
just and humane conditions of work and for maternity relief, Article 47 requires that the State
should raise the level of nutrition and the standard of living of its people and improvement of
public health as among its primary duties. The obligations cast on the State in the above Articles
constitute social security.
A Social Security Division has been set up under the Ministry of Labour and Employment.
The division deals with framing of social-security policy for the workers, administration of all
the legislations relating to social security and the implementation of the various social-security
schemes. In the context of labour, social security aims at mitigating risks against loss in earnings
or earning capacity due to age, illness or work-related injuries.
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Social security to the workers is provided, among others, through five major central Acts:
i) The Employees’ State Insurance Act, 1948
ii) Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
iii) The Workmen’s Compensation Act
iv) The Maternity Benefit Act
v) The Payment of Gratuity Act
In addition, there are a large number of welfare funds for certain specified segments of work-
ers such as beedi workers, cine workers and construction workers.
The major thrust of social security relating to labour is two-pronged:
Those relating to the medical facilities, compensation benefits and insurance cover-
age to the employees in case of accidents, incapacity, illness
Those relating to the provident fund and gratuity provisions
It consists of preventive, promotional and protective measures for labour welfare.
10.2 The Employees’ State Insurance Act, 1948

The Employees’ State Insurance Act, (ESIC) 1948, is a piece of social-welfare legislation
enacted primarily with the object of providing certain benefits to employees in case of sick-
ness, maternity and employment injury and also to make provision for certain others mat-
ters. The Act is an effort at achieving the goal of socio-economic justice mentioned in the
Directive Principles of State Policy under Part 4 of Constitution, in particular, Articles 41,
42 and 43, which enjoin the State to make effective provisions for securing the right to work,
to education and public assistance in cases of unemployment, old age, sickness and disable-
ment. Specifically, there is a scheme in the Act that makes provisions for the following ben-
efits under different contingencies (see Figure 10.1).
It may be seen that the ESI Act aims to provide security (financial and medical) to
employees (and their dependents) during contingencies that may affect their earning capaci-
ties, temporarily or permanently.
10.2.1 Scope, Applicability and Coverage

The Act extends to the whole of India. The ESIC Act applies to non-seasonal, power-using
factories or manufacturing units employing 10 or more persons, and non-power using
establishments employing 20 or more persons. Under the enabling provisions of the Act,
a factory or establishment, located in a geographical area, notified for the implementation
Figure 10.1
Employees’ State Insurance Act, 1948
The ESI Act.
ESI Corporation
Scheme
1. Sickness Benefit
2. Maternity Benefit
3. Disablement Benefit
4. Dependent’s Benefit
5. Medical Benefit
6. Funeral Expenses
M10_SING6013_01_C10.indd 196 6/15/10 3:07:26 PM

Social-security Legislations 197
of the scheme, falls in the purview of the Act. Employees of the aforesaid categories of fac-
tories or establishments, but drawing wages only up to INR 10,000 a month, are entitled
to health insurance cover under the ESI Act. The wage ceiling for the purpose of coverage
is revised from time to time, to keep pace with the rising cost of living and subsequent
wage hikes. The present ceiling of INR 10,000 has been revised recently. The appropriate
government, state or central, is empowered to extend the provision of the ESI Act to vari-
ous classes of establishment—industrial, commercial, agricultural or otherwise in nature.
Under these enabling provisions, most of the state governments have extended the ESI
Act to certain specific classes of establishments, such as shops, hotels, restaurants and
cinemas, employing 20 or more persons. But no industry has the right to opt out of the
scheme.
An employee who is covered at the beginning of a contribution period shall con-
tinue to remain covered till the end of that contribution period notwithstanding the fact
that his wages may exceed the prescribed wage ceiling at any time after the commence-
ment of that contribution period. Wage ceiling for the purpose of coverage is revised
from time to time by the central government on the specific recommendation of the ESI
Corporation.
The Act, in the first instance, was to be applicable to factories as defined in the Act. The
government, however, could extend it to other establishments too. Over the years, the Act
has been extended to all kinds of establishments. This is a “beneficient” Act and, therefore,
the interpretation of its coverage has been very liberal. The following are excluded from the
coverage of the Act:
i) Factories working with the aid of power wherein less than 10 persons are employed
ii) Factories working without the aid of power wherein less than 20 persons are
employed
iii) Seasonal factories engaged exclusively in any of the following activities, viz. cotton
ginning, cotton or jute pressing, decortication of groundnuts, the manufacture of
coffee, indigo, lac, rubber, sugar (including gur) or tea or any manufacturing process
incidental to or connected with any of the aforesaid activities, and including factories
engaged for a period not exceeding seven months in a year in blending, packing or
repackaging of tea or coffee, or in such other process as may be specified by the cen-
tral government
iv) A factory that was exempted from the provisions of the Act as being a “seasonal fac-
tory” will not lose the benefit of the exemption on account of the amendment of the
definition of “seasonal factory”
v) Mines subject to the Mines Act, 1952
vi) Railway running sheds
vii) Government factories or establishments, whose employees are in receipt of benefits
similar or superior to the benefits provided under the Act
viii) Members of Indian navy, military and air force
Employee: This term includes any person who is engaged or employed for wages/salary in
connection with the work of the establishment to which this Act applies. It does not include
any person whose wages (excluding OT) exceed the limit prescribed by the central govern-
ment—currently INR 10,000 per month.
Every employee (including casual and temporary employees), whether employed
directly or through a contractor, who is in receipt of wages up to INR 10,000 is entitled to be
insured under the ESI Act. However, apprentices engaged under the Apprentices Act are not
entitled to the ESI benefits. Coverage of part-time employees under the ESI Act will depend
on whether they have “contract of service” or “contract for service” with the employer. The
former is covered, whereas the latter are not covered under the ESI Act.
M10_SING6013_01_C10.indd 197 6/15/10 3:07:32 PM

Besides, in the following cases, the employees have been held to be covered under the Act:
i) Persons employed in a canteen of a club
ii) Drivers employed by the transport organization
iii) Persons engaged in distribution and sale of products
iv) Persons carrying administrative work of processing the orders and executing sales
v) Hawkers employed for the sale of products
vi) Employees of cycle stand and canteen run in cinema theatres by contractors
vii) Members of editorial and administrative staff of a printing press, publishing,
newspaper
viii) A home worker rolling beedis at home
ix) Medical representative
x) Persons employed in a hospital attached to and maintained by factory
xi) Part-time doctor employed for ambulance room
xii) Book-binders engaged by a contractor
xiii) Sales clerk working in a factory
It can, once again, be seen that the interpretation regarding coverage is very liberal. As
regards coverage of category of employees or type of establishment, in case of doubt, it will
be prudent to err on the side of liberal and inclusive interpretation. More often that not you
will be right!
Exemption from Maternity Benefit Act, 1961 and Workmen’s Compensation Act, 1923:
An employer/establishment covered under the ESI Act is exempt from the provisions of
Maternity Benefit Act and Workmen’s Compensation Act. It is specifically provided that when
a person is entitled to any of the benefits provided by the ESI Act, then he/she shall not be enti-
tled to recover any similar benefits admissible under the provisions of any other enactment.
10.2.2 Important Terms Used in the Act

Exempted Employee: An employee who is not liable under this Act to pay the employees’
contribution
Family: All or any of the following relatives of an insured person:
i) A spouse
ii) A minor, legitimate or adopted child, dependent upon the insured person
iii) A child who is wholly dependent on the earnings of the insured person and who is
(a) receiving education, till he or she attains the age of 21 years (b) an unmarried
daughter
iv) A child who is infirm by reason of any physical or mental abnormality or injury and
is wholly dependent on the earnings of the insured person, so long as the infirmity
continues
v) Dependent parents
Insurable Employment: An employment in a factory or establishment to which this Act
applies
Insured Person: A person who is or was an employee in respect of whom contributions are or
were payable under this Act and who is entitled to any benefit under the ESIC Scheme
Sickness: A condition that requires medical treatment and attendance and necessitates
abstention from work on medical grounds
M10_SING6013_01_C10.indd 198 6/15/10 3:07:32 PM

Contribution: The sum of money payable to the “Corporation” by the principal employer in
respect of an employee and includes any amount payable by or on behalf of the employee in
accordance with the provisions of this Act
Employment Injury: A personal injury to an employee caused by accident or an occupa-
tional disease arising out of and in the course of his employment, being an insurable employ-
ment, whether the accident occurs or the occupational disease is contracted within or outside
the territorial limits of India. For example, an insured person, if deployed abroad, or if travel-
ling abroad in course of his employment meets with an accident, he shall be eligible to receive
the benefits to which he is entitled under the Act.
Permanent Partial Disablement: Such disablement of a permanent nature as reduces the
earning capacity of an employee in every employment that he was capable of undertaking
at the time of the accident resulting in the disablement. For example, loss of the index fin-
ger of the right hand may result in a permanent partial disability. The Part II of the second
schedule of the Act lists the partial disablements and prescribes the percentage of partial
disablement.
Permanent Total Disablement: Such disablement of a permanent nature as incapacitates an
employee for all work that he was capable of performing at the time of the accident result-
ing in such disablement. Part I of Schedule 2 contains a list of all injuries considered to be
of permanent total nature. If two or more permanent partial disablements (as per Part 2)
combine to constitute injury amounting to 100 per cent or more, the same will constitute
permanent total disablement. For example, loss of both hands will constitute total permanent
disablement.
Temporary Disablement: A condition resulting from an employment injury, which requires
medical treatment and renders an employee, as a result of such injury, temporarily incapable
of doing the work that he was doing prior to or at the time of the injury
Wages: All remuneration paid or payable, in cash to an employee, if the terms of the con-
tract of employment, express or implied, were fulfilled and includes any payment to an
employee in respect of any period of authorized leave, lock-out, strike that is not illegal
or lay-off and other additional remuneration, if any, paid at intervals not exceeding two
months
Wage does not include:
a) Any contribution paid by the employer to any pension fund or provident fund
b) Travelling allowance or the value of any travelling concession
c) Any sum paid to the person employed to defray special expenses entailed on him by
the nature of his employment
d) Any gratuity payable on discharge
Table 10.1 illustrates the components that are to be reckoned as wages for the purpose of
the Act. ESI Corporation
Provisions of the ESI Act
are administered by a
10.2.3 Administration corporate body called the
Employee State Insurance
There is elaborate administrative machinery for the implementation of the provisions of the Corporation. It comprises
most comprehensive of all social security legislations. members represent-
ing interest groups that
E SI CO RP O RAT IO N. This social-security programme is administered by a cor- include, employees,
employers, the central
porate body called the Employee State Insurance Corporation. It comprises members repre- and state governments,
senting interest groups that include employee, employers, the central and state government, besides representatives
besides representatives of parliament and the medical profession. The corporation is headed of parliament and the
by the Union Minister of Labour as its chairman, where as the Director General, appointed medical profession. The
by the central government, functions as its CEO. A standing committee constituted from corporation is headed
by the Union Minister of
amongst the members of the corporation, acts as an executive body. The medical benefit Labour.
council, constituted by the central government, is yet another statutory body that advises the
corporation on matters related to effective delivery of services to the beneficiary population.
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Table 10.1
To be Deemed as Wages Not to be Deemed as Wages
Wages for ESI
contributions. • Basic pay • Contribution paid by the employer to any
pension/provident of under ESI Act
• Dearness Allowance
• Sum paid to defray special expenses
• House Rent Allowance
entailed by the nature of employment—
• City Compensatory Allowance daily allowance paid for the period spent
on tour
• Overtime Wages (but not to be taken into
account for determining the coverage of • Gratuity payable on discharge
employee)
• Pay in lieu of notice of retrenchment
• Payment for day of rest compensation
• Production Incentive • Benefits paid under the ESI Scheme
• Bonus other than statutory bonus • Encashment of leave
• Night-shift Allowance • Payment of Inam, which does not form

part of the term of employment
• Heat, Gas and Dust Allowance
• Washing allowances for livery
• Payment for unsubstituted holidays
• Conveyance amount towards
• Meal/Food Allowance
reimbursement for duty-related journey
• Suspension Allowance
• Lay-off Allowance
• Children Education Allowance (not being
reimbursement for actual tuition fees)
The Corporation is vested with the following powers:

To promote measures for the improvement of health and welfare of the insured
employees and for the rehabilitation and re-employment of those who have been
disabled or injured
To appoint inspectors for purposes of the Act
To determine the amount of contribution payable in respect of employees of a factory or
establishment that has not furnished or maintained any particulars, registers or records
ESI Scheme Financing
ESI scheme is a self-
financing health- FINANCE . Like most social-security schemes the world over, ESI is a self-financing health-
F
insurance scheme. insurance
i scheme. Contributions are raised from covered employees and their employers as a fixed
Contributions are raised
percentage
p of wages. As of now, covered employees contribute 1.75 per cent of the wages, whereas
from covered employees
and their employers as the
t employers contribute 4.75 per cent of the wages. Employees earning less than INR 50 a day as
a fixed percentage of daily
d wage are exempted from payment of their share of contribution. The state government, as
wages. As of now, cov- per
p the provision of the Act, contributes 1/8 of the expenditure on medical benefit within a per
ered employees contrib- capita
c ceiling of INR 1000 per insured person per annum. Any additional expenditure incurred
ute 1.75 per cent of the
by
b the state government, over and above the ceiling, and not falling within the shareable pool, is
wages, whereas as the
employers contribute borne
b by the state governments concerned. The responsibility for payment of all contributions is
4.75 per cent of the wages. that
t of the employer with a right to deduct the employees’ share of contribution from employees’
Employees earning less wages
w relating to the period in respect of which the contribution is payable.
than INR 50 a day as
daily wage are exempted
from payment of their CO NT R I BUT I O N P E R I O D S AND BE NE F I T P E R I O D.
C Workers, covered
share of contribution. u
under the ESI Act, are required to pay contribution towards the scheme on a monthly basis.
C
Contribution period means a six-month time span from 1 April to 30 September and 1 October
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Table 10.2
Contribution Period Corresponding Benefit Period
Contribution and benefit
1 April to 30 September 1 January to 30 June of the following year periods.
1 October to 31 March 1 July to 31 December
to 31 March. Thus, in a financial year, there are two contribution periods of six months’ dura-
tion. Cash benefits under the scheme are generally linked with the contribution paid. The ben-
efit period starts three months after the closure of a contribution period (see Table 10.2).
10.2.4 Benefits in Detail

Employees covered under the scheme are entitled to medical facilities for self and depen-
dants. They are also entitled to cash benefits in the event of specified contingencies resulting
in loss of wages or earning capacity, as mentioned above. The insured women are entitled
to maternity benefit for confinement. Where death of an insured employee occurs due to
employment injury or occupational disease, the dependants are entitled to family pension.
In this section, we examine the various benefits that the insured employees and their depen-
dants are entitled to, the duration of benefits and the contributory conditions.
MED ICAL BENEF IT. Full medical facilities for self and dependants are admissible
from day one of entering insurable employment. The primary, outpatient, in-patient and
specialist services are provided through a network of panel clinics, whereas ESI dispensaries
and hospitals and super specialty services are provided through a large number of advanced,
empanelled medical institutions on referral basis. The eligibility criteria for availing the med-
ical benefits are the following:
Facilities are admissible from day one of entering insurable employment for self and
dependants such as spouse, parents and children—own or adopted
For self and spouse on superannuation, subject to having completed five years in
insurable employment on superannuation or in case of having suffered permanent
physical disablement during the course of insurable employment
The rate of contribution for superannuated/disabled is INR 120 per annum payable in
lump sum at the local office for availing full medical care for self and spouse
SIC KNESS BENEF IT. Sickness benefit in cash is payable under three types of con-
ditions as mentioned below:
Sickness Benefit: Sickness benefit is payable to an insured person in cash, in the event of
sickness resulting in absence from work and duly certified by an authorized insurance medi-
cal officer/practitioner.
The benefit becomes admissible only after an insured has paid contribution for at
least 78 days in a contribution period of 6 months.
Sickness benefit is payable for a maximum of 91 days in 2 consecutive contribution
periods [one year].
Payment is to be made by the local office within 7 days of certificate of sickness at a
standard rate, which is not less than 50 per cent of the wages.
[The logic behind fixing of 78 and 91 days of contribution is based on actuarial studies.]
Extended Sickness Benefit: Extended sickness benefit is payable to insured persons for the
period of certified sickness in case of the specified, 34 long-term diseases that need prolonged
treatment and absence from work on medical advice.
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For entitlement to this benefit, an insured person should have been in insurable
employment for at least 2 years. He/she should also have paid contribution for a mini-
mum of 156 days in the preceding 4 contribution periods or say 2 years.
ESI is payable for a maximum period of 2 years on the basis of proper medical certi-
fication and authentication by the designated authority.
Amount payable in cash as extended sickness benefit is payable within 7 days follow-
ing the submission of complete claim papers at the local office concerned.
Enhanced Sickness Benefit: This cash benefit is payable to insured persons in the productive
age group for undergoing sterilization operation—either vasectomy or tubectomy.
The contribution is the same as for the normal sickness benefit.
Enhanced sickness benefit is payable to the IPs for 14 days for tubectomy and for
7 days in case of vasectomy.
The amount payable is double the standard sickness benefit rate that is equal to full
wages.
M AT E R NI T Y BE NE F I T. Maternity benefit is payable to insured women in case of

confinement or miscarriage or sickness related thereto.
For claiming this, the insured woman should be paid for at least 70 days in 2 consecu-
tive contribution periods, i.e., 1 year.
The benefit is normally payable for 12 weeks, which can be further extended up to
16 weeks on medical grounds.
The rate of payment of the benefit is equal to wage or double the standard sickness
benefit rate.
The benefit is payable within 14 days of duly authenticated claim papers.
D IS ABLE M E NT BE NE F I T (CASH ). Disablement benefit is payable to insured

employees suffering from physical disablement due to employment injury or occupation dis-
ease.
An insured person should be an employee on the date of the accident. Temporary
disablement benefit at 70 per cent of the wages is payable till temporary disablement
lasts and is duly certified by an authorized insurance medical officer.
In case of permanent disablement, the cash benefit is payable for life.
The amount payable is worked out on the basis of earning capacity determined by a
medical board.
Disablement benefit is payable within one month of submission of the complete claim
papers.
D EP E NDANT ’ S BE NE F I T S (C ASH ). Dependant’s benefit (family pension) is

payable to dependants of a deceased, insured person where death occurs due to employment
or occupational disease.
A widow can receive this benefit on a monthly basis for life or till remarriage.
A son or daughter can receive this benefit till 18 years of age.
Other dependants like parents, including a widowed mother, can also receive the
benefit under certain conditions.
The rate of payment is about 70 per cent of the wages shareable among dependants in
a fixed ratio.
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The first instalment is payable within a maximum of three months following the death
of an insured person, and thereafter, on a regular monthly basis.
FUNERAL EXP ENSES. Funeral expenses are payable in case of death, subject to a
maximum of INR 2,500.
B ENEF IT S NOT TO BE C O M BI NE D. An employee shall not be entitled to

receive for the same period:
a) Both sickness benefit and maternity benefit
b) Both sickness benefit and disablement benefit for temporary disablement
c) Both maternity benefit and disablement benefit for temporary disablement
The employee shall be entitled to choose any one of the aforesaid benefits, at his option.
10.2.5 Obligations of Employers

1. The employer should get his factory or establishments registered with the ESI
Corporation within 15 days after the Act becomes applicable to it, and obtain the
employer’s code number.
2. The employer should obtain the declaration form from the employees covered under
the Act and submit the same along with the return of declaration forms to the ESI
office. He should arrange for the allotment of insurance numbers to the employees
and their identity cards.
3. The employer should deposit the employees’ and his own contributions to the ESI
account in the prescribed manner; whether he has sufficient resources or not, his
liability under the Act cannot be disputed. He cannot justify non-payment of ESI
contribution due to non-availability of finance.
4. The employer should furnish a Return of Contributions along with the challans of
monthly payment, within 30 days of the end of each contribution period.
5. The employer should not reduce the wages of an employee on account of the contri-
bution payable by him (employer).
6. The employer should cause to be maintained the prescribed records/registers namely
the register of employees, the inspection book and the accident book.
7. The employer should report to the ESI authorities of any accident in the place of
employment, within 24 hours or immediately in case of serious or fatal accidents.
He should make arrangements for first-aid and transportation of the employee to
the hospital. He should also furnish to the authorities such further information and
particulars of an accident as may be required.
8. The employer should inform the local office and the nearest ESI dispensary/hospital,
in case of death of any employee, immediately.
9. The employer must not put to work any sick employee and must allow him leave, if
he/she has been issued the prescribed certificate.
10. The employer should not dismiss or discharge any employee during the period he/
she is in receipt of sickness/maternity/temporary disablement benefit, or is under
medical treatment, or is absent from work as a result of illness duly certified or due
to pregnancy or confinement.
Most organizations in the organized sector nowadays provide adequate benefits to those in their
employment. A number of these organizations have also facilitated some kind of medical, acci-
dent and life insurance to the employees. The PSUs have elaborate schemes for the treatment of
M10_SING6013_01_C10.indd 203 6/15/10 3:07:33 PM

their employees. A sizeable number of these employees, however, are above the salary limit of
INR 10,000 per month. It is those employees in the unorganized sector, the contractual employ-
ees, earning less than INR 10,000 per month whom the Act aims to protect from risks in working
life, which may impact their earning. From an employee relation point of view, the organization
must address this insecurity of the individual employee and benchmark the provisions of the ESI
Act as the minimum that can be provided to the employees. Without this security, the organiza-
tion will not be able to harness the full potential of the human resources that it employs.
10.3 Maternity Benefit Act, 1961

Prior to the enactment of the Maternity Benefit Act of 1961, there were in force several central
and state maternity benefit Acts in the country. However, there was no uniformity in their
provisions for all women workers in the country. It is true that its object was achieved by the
enactment of the Employees’ State Insurance Act, 1948, which superseded the provisions of
several Maternity Benefit Acts. But the ESI did not cover all women workers in the country.
The Maternity Benefit Act of 1961 was, therefore, passed to provide uniform maternity ben-
efit for women workers in certain industries not covered by the Employees’ State Insurance
Act, 1948. The Act is amended by the Amendment Act No. 29 of 1995. The Amendment Act
has come into force with effect from 1 February 1996.
10.3.1 Objectives
1. To provide for maternity benefit to women workers in certain establishments
2. To regulate the employment of women workers in such establishments for a certain
period before and after child birth
10.3.2 Coverage
The Act extends to the whole of India and is applicable to:
Every factory, mine or plantation (including those belonging to the government)
An establishment engaged in the exhibition of equestrian, acrobatic and other perfor-
mances, irrespective of the number of employees
To every shop or establishment wherein 10 or more persons are employed or were
employed on any day of the preceding 12 months.
The state government may extend the Act to any other establishment or class or establish-
ments; industrial, commercial, agricultural or otherwise. However, the Act does not apply
to
t any such factory/other establishments to which the provisions of the Employees’ State
The Maternity Benefit Insurance
I Act are applicable. But, where the factory/establishment is governed under the
Act, 1961 was enacted Employees’
E State Insurance Act, and the woman employee is not qualified to claim maternity
after the enactment of
the ESI Act, 1948. Prior benefi
b t under Section 50 of that Act, because her wages exceed the stipulated amount, such
to this enactment, there women
w will be covered under the provisions of Maternity Benefit Act.
were several such enact-
ments from different
state governments and 10.3.3 Provisions
1
the central government.
The Enactment of 1961 CO ND I T I O NS AND E LI G I BI LI T Y
C
brought uniformity in
such provisions and also
Ten weeks before the date of her expected delivery, she may ask the employer to give
sought to provide cover- her light work for a month. At that time, she should produce a certificate that she is
age to women left outside pregnant.
the coverage of ESI Act,
1948. She should give written notice to the employer about seven weeks before the date of
her delivery that she will be absent for six weeks before and after her delivery. She
M10_SING6013_01_C10.indd 204 6/15/10 3:07:34 PM

should also name the person to whom payment will be made in case she cannot take
it herself.
She should take the payment for the first six weeks before she goes on leave. She will
get payment for the 6 weeks after child-birth within 48 hours of giving proof that she
has had a child.
A woman worker is eligible for maternity benefit when she is expecting a child and
has worked for her employer for at least 80 days in the 12 months immediately pre-
ceding the date of her expected delivery
The maximum period for which any woman shall be entitled to maternity benefit
shall be 12 weeks in all, whether taken before or after childbirth. However she cannot
take the benefit for more than six weeks before her expected delivery.
Prior to the amendment of 1989, a woman employee could not avail of the six weeks’ leave
preceding the date of her delivery; she was entitled to only six weeks’ leave following the day
of her delivery. However, by the above amendment, the position has changed. Now, in case a
woman employee does not avail of 6 weeks’ leave preceding the date of her delivery, she can
avail of that leave following her delivery, provided the total leave period, i.e. preceding and
following the day of her delivery does not exceed 12 weeks.
CASH BENEF IT S
Leave with average pay for six weeks before the delivery
Leave with average pay for six weeks after the delivery
A medical bonus of INR 250 if the employer does not provide free medical care to the
woman. This was later amended to INR 1,000 with a proviso that the government can
periodically increase it periodically subject to an ultimate limit of INR 20,000.
An additional leave with pay up to one month if the woman shows proof of illness due
to the pregnancy, delivery, miscarriage or premature birth
In case of miscarriage, six weeks leave with average pay from the date of miscarriage
N O N- CASH BENEF IT S/ P R I VI LE G E
Light work for ten weeks (six weeks plus one month) before the date of her expected
delivery, if she asks for it
Two nursing breaks in the course of her daily work until the child is 15 months old
No discharge or dismissal while she is on maternity leave
No change to her disadvantage in any of the conditions of her employment while on
maternity leave
Pregnant women discharged or dismissed may still claim maternity benefit from the
employer
Exception: Women dismissed for gross misconduct lose their right under the Act for
Maternity Benefit
LEAV E F O R M ISCARRIAG E AND T UBE CTO M Y O P E R AT I O N

Leave with wages at the rate of maternity benefit, for a period of six weeks immedi-
ately following the day of her miscarriage or her medical termination of pregnancy
Entitled to leave with wages at the rate of maternity benefit for a period of two weeks
immediately following the day of her tubectomy operation
M10_SING6013_01_C10.indd 205 6/15/10 3:07:34 PM

10.4 The Workmen’s Compensation

Act, 1923
The Workmen’s Compensation Act is the first piece of legislation towards social security.
It deals with compensation for workers who are injured in the course of duty. The scheme
of the Workmen’s Compensation Act is not to compensate the worker in lieu of wages. The
general principle is that a worker who suffers an injury in the course of his employment,
which results in a disablement, should be entitled to compensation and in the case of a fatal
injury, his dependants should be compensated. Under the Workmen’s Compensation Act, it
is the employer who is responsible to pay compensation (as opposed to the Employees’ State
Insurance. For those establishments to which the Employees’ State Insurance Act applies, the
liability to pay compensation is on the ESI Corporation).
The meaning of “compensation” in this Act is limited to compensation granted under the
Act for employment injuries sustained during the course of work. It is also limited to specifically
monetary compensation other than a salary, travel allowance, and any other form of remunera-
tion that could be paid under normal circumstances of employment. To get an overall under-
standing of the Act, it is useful to look at the “Statement of Objects and Reasons” published with
the Act when it was first passed in 1923. To quote, “. . . the growing complexity of industry in this
country with the increasing use of the machinery and consequent danger to workmen, along
with the comparative poverty to workmen themselves renders it advisable that they should be
protected, as far as possible from hardship arising out of accidents. An additional advantage of
a legislation of this type is that by increasing the importance for employers of adequate safety
devises, it reduces the number of accidents to workmen in a manner that cannot be achieved by
official inspection. Further, the encouragement given to employers to provide adequate medical
treatment for their workmen should mitigate the effects of such accidents as does occur. The
benefits so conferred added to the increased sense of security, which he will enjoy, should render
industrial life more attractive and thus increase the available supply of labour. At the same time,
a corresponding increase in the efficiency of the average workmen may be expected.”1
While these were the official objects and reasons, the reality in India today is that the
protection offered by the Act does not act as an incentive for workers, most of whom are
unaware of it and who simply join work to earn a livelihood. At the time the framing of the
bill, two criteria were followed in determining whom the Act would apply to:1
1. Those industries that were more or less organized
2. Workmen whose occupations were hazardous
Nowadays, the government (state or central) may extend the application of this Act to other
establishments of an industry that may not be organized.

The Act extends to the whole of India.
ESTABLI SH M E NT S C OVE R E D. All establishments hiring 20 workers and above

must compulsorily register themselves under the Employees’ State Insurance Act (ESI Act).
The Workmen’s Compensation Act is applicable only to those establishments that do not
come within the purview of the ESI Act.
Also, if employers fail to register themselves under the ESI Act, they will be held respon-
sible to pay compensation under the Workmen’s Compensation Act.
However, the Workmen’s Compensation Act will only apply to those persons considered
“workers” and those considered “employers”, as defined under the Act.
EL IG I BI LI T Y. The Act will apply only to persons recognized as a “workman” under

the Act.
M10_SING6013_01_C10.indd 206 6/15/10 3:07:34 PM

However, with amendment to the Act in the year 2000, the eligibility has been made
more inclusive. In addition, various judicial rulings have forever been expanding the people
who are eligible to claim benefits under the Act. The following list would give an indication
of the eligibility:
The only requirement is that the worker should be employed in an activity, which has
to be either listed in schedule II of the Act, or any duty having connection with the
specified activity mentioned in the schedule.
Schedule III of the Act contains a list of diseases and persons in occupations where
infection is possible. They can claim compensation under this Act. They are “work-
men” for the purposes of this Act.
In addition to persons employed in the capacity mentioned in Schedule II, a driver,
a mechanic, cleaner, or person employed in any other capacity in connection with a
motor vehicle are also considered “workers” under this Act.
In case a part of the work of an establishment is contracted out to a contractor, and
a worker employed by the contractor for this purpose is injured, then the princi-
pal employer and not the contractor (who is the worker’s immediate employer) is
responsible to pay compensation as though the worker was directly employed by him.
However, this principal employer holds the right to be indemnified by the person
who would normally pay for the compensation of an injured/deceased worker, i.e.,
the contractor.
The Employer: Defined in this Act as a body of person/s whom the worker has entered into
a contract of apprenticeship or service with, the term “employer” also extends to his agent,
legal representative of a dead employer, or a temporary employer on to whom the worker has
been lent on hire basis.
E M P LOY ER’S L IABIL IT Y F O R CO M P E NSAT I O N. As per Section 3 of

the Act, the employer is liable to pay compensation if the worker is injured by an accident
that:
1. Arises out of (i.e., while engaged in) work
2. Occurs in the course of his employment (i.e., during work hours)
3. Causes an injury that results in disablement of the worker
If these three conditions are met, the employer of an establishment covered by the Act is
bound to pay compensation. While the second condition is easy to prove, the first condition
has been difficult to establish in certain cases. (See Box 10.1.)
A bus was on its last trip for the day. Some assailants entered the bus, sprayed chilli pow-
der on the passengers and shot the conductor dead. It occurred during work hours, but
could such an act be termed as an injury “arising out of the course of work”?
In this particular case, it was argued—successfully—that such an incident is a con-
tingency that can arise during the course of duty. The occupants were exposed to that
particular risk by reason of their employment.
The above argument could be extended to almost all situations where the workman
was present, either at the workplace, or during duty hours, or both. What, then, could be
the purpose of laying down the three conditions when the interpretation could be so broad
as to defeat the very purpose of defining the same?
M10_SING6013_01_C10.indd 207 6/15/10 3:07:34 PM

D IS ABLE M E NT. The definition of “disablement” is very important in this Act, as it

determines the extent of compensation that can be claimed by the worker injured in the
course of his employment.
Under the Act, there are four types of eventualities, which can be compensated:
1. Death
2. Permanent Total Disablement: Disablement that incapacitates a worker from all
kinds of work
3. Permanent Partial Disablement: Disablement that reduces the capacity to work
in any employment similar to that the worker was performing at the time of the
accident
4. Temporary Disablement: This may be total or partial disablement, of temporary
nature, which reduces the earning capacity of the worker in any similar employment
for the period of disablement.
Figure 10.2 presents a schematic representation of the various kinds of injuries (including
death) defined in the Act. (Also see Box 10.2.)
Total disability (i.e. 100 per cent disability) has a different meaning under the Workmen’s
Compensation Act as compared to its meaning in normal language. According to the Act,
disability is determined with reference to the work that the worker was doing immediately
before accident took place, and if the resulting injury leaves him incapable of performing any
work of a similar nature, then his disability is considered as 100 per cent.
If the injury suffered by the worker produces a disease, which aggravates a pre-existing dis-
ease thereby causing a death or disability, it is still compensable (i.e. compensation can be paid).
The employer cannot defend himself by saying that the worker already had an existing
disease. For example, a worker has a pre-existing heart condition, which due to the strain or
over exertion of work causes his death, the employer is still liable to pay compensation. All
that is required is that the accident suffered during the course of and arising out of the work
immediately led to his death injury. In legal terminology, the injury suffered by the workmen
at work should be the “proximate cause” of his death, or that there should be a “close causal
connection” between the accident and the injury.
CO M P E NSAT I O N NOT PAYABLE . An employer is not liable to pay compen-

sation under following circumstances:
1. Where the disablement does not last for more than three days
2. Where the disablement has arisen out of the following:
a) Drugs or drink
b) Disobedience
c) Disregard for the safety measures prescribed
Figure 10.2
Classification of injuries Eventualities under which compensation
(including death). may be payable under WC Act
Death Disablement
Permanent Temporary
Total Partial Total Partial
M10_SING6013_01_C10.indd 208 6/15/10 3:07:34 PM


Discuss as to the nature of the following kinds of disablements:
Manmohan, a machinist in an engineering shop, got his fingers cut off by accident.
This injury has reduced his capacity to work in any such employment.
Gursharan is a helper with the public-health-engineering department. While clean-
ing an overhead tank, he slipped and fell, fracturing his hand. He could not work for one
month.
Binu George lost both his eyesight and his legs when the bus that he was driving met
with an accident. He can no longer work as a driver or do any work of a similar nature.
An accident left a worker—a porter—with a defect in his leg, making him incapable
of performing his work as a porter. He could, however, do some other work.
The grey area in this section is that there is no definition whatsoever that defines what is
“drink”, “drugs”, “disobedience” or “disregard to safety measures”. The employers may take
advantage of this section and evade paying the compensation. However, being under the
influence of drugs or alcohol is not a defence in the case of death or total disablement result-
ing from injury. Second, in the case of disobedience, such disobedience should be “wilful”.
OC CUPAT IO NAL D ISEAS E . An occupational disease, while in service, is a dis-

ease that inflicts workers in that particular occupation in which s/he was employed in and
resulting from exposure to a hazardous working atmosphere, particular to that employment.
If a worker contracts such a disease, then the employer is liable to pay compensation, pro-
vided that the worker was employed by him for a continuous period of six months.
An occupational disease that is contracted in the course of employment will fall within
the meaning of an “accident” for the purposes of this Act. In the case of such a disease being
contracted, the employer will be liable to pay compensation to the affected worker.
The occupational diseases for which compensation is payable are specified in a list
attached to the Act—specifically, Part A of Schedule III.
Some examples of occupational diseases are as follows:
Skin diseases caused by physical, chemical or biological agents
Bronchopulmonary disease caused by flax, hemp and sisal dust (Byssinosis)
Occupational asthma caused by recognized sensitizing agents inherent to the work
process
10.4.2 Compensation
The compensation to be paid by the employer for injuries caused depends on the extent of
the disablement suffered by the worker; more severe disablements naturally receive higher
compensation. The guiding principle in the payment of compensation is: the higher the age
of the injured worker, the lower the compensation. Compensation, and its payment, thereof,
has been categorized as under:
1. Death
2. Disablement
a) Permanent total disablement
b) Permanent partial disablement
c) Temporary disablement:
i) Temporary total disablement
ii) Temporary partial disablement
M10_SING6013_01_C10.indd 209 6/15/10 3:07:40 PM

T HE BASI S O F C ALC ULAT I O N. Wages are the basis for the amount of com-
pensation paid. Two workers earning different salaries, therefore, will get different amounts
of compensation even though the injury they suffered might be identical. Compensation
under this Act is calculated on the basis of the monthly wage received by the worker. Accord-
ing to this Act, it is the amount of wages that would be payable for a month’s service, i.e.,
irrespective of whether the worker is paid on a daily, weekly or piece-rate basis.
Wages: The term “wage” is defined as the privilege or benefit that is measurable in terms of
either money, other than any travel allowance, or provident fund or any other special benefit
claimable by the worker, during the course of his employment.
D EP E NDANT. A “dependant” is defined under the Act in Section 2(d). This definition
is of vital value as it determines who will be eligible to receive the compensation, in case the
worker dies in the course of his employment.
Q UANT UM O F C O M P E NSAT I O N. The Act prescribes the manner in which

“compensation” is to be computed and paid in the event of death or disablement resulting
from accidents arising out of and in the course of employment.
Death: In case of death of an employee, the compensation due to the dependants is an amount
equal to 50 per cent of the monthly salary of the deceased worker multiplied by the relevant
factor or an amount of INR 80,000, whichever is more. The minimum compensation in the
case of death in no circumstances can be less than INR 80,000.
The relevant factor is mentioned in the Schedule IV of the Act. The factor depends on the
age of the deceased person, i.e., the number of years the person could have worked for, if he
did not die on the job. Box 10.3 illustrates how the compensation is calculated in case of the
death of an employee.
P ER M ANE NT TOTAL D I SABLE M E NT. Where there is total permanent dis-

ablement resulting from the injury suffered, the worker is entitled to be paid 60 per cent of
his monthly salary, multiplied by the relevant factor, or an amount of INR 90,000, whichever
is more. The minimum compensation in the case of total permanent disablement cannot be
less than INR 90,000. Box 10.4 illustrates the computation of the compensation payable to an
employee in case of permanent total disability.
Permanent Partial Disablement: In the case of partial disablement of the worker, the
amount he is entitled to is the percentage of that for total permanent disablement, the
BOX 10.3 COMPENSATION IN CASE OF DEATH
Thirty-five-year-old Budhan Majhi, a fitter in a State-owned steel plant, met with an acci-
dent and died while at work (i.e., in the course of employment). At the time of his death,
he drew a monthly wage of INR8,000. As per Schedule IV of the Act, the relevant factor
applicable to his case would be 197.06. Thus, the amount of compensation payable to
his dependants will be arrived at in the following way:
i) 50 per cent of the current salary = INR 4,000
ii) Total compensation payable = 50 per cent of current salary × relevant factor
= 2000* × 197.06
= INR 3,04,120
*Where the monthly wage of a worker is more than INR 4,000, it is taken to be only INR
4,000 for calculating compensation in the case of either death or permanent disablement.
In this case, therefore, even though the basic pay was INR 8,000 per month, for the pur-
pose of computing compensation, it has been reckoned as INR 4,000 (maximum permis-
sible under the Act) and 50 per cent of INR 4,000 is INR 2,000.
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BOX 10.4 COMPENSATION IN CASE OF PERMANENT TOTAL DISABILITY

Laldhari Mahato, a rigger of 35 years of age, meets with an accident and suffers per-
manent total disablement while at work (i.e., in the course of employment). At the time,
he drew a monthly wage of INR 3,500. As per Schedule IV of the Act, the relevant factor
applicable to his case would be 197.06. The amount of compensation payable will be
arrived at as follows:
i) 60 per cent of the current salary = INR 2,100
ii) Total compensation payable = 2,100 ×197.06
= 4,13,826
percentage being given in the schedule of the Act. Schedule I, Part II, to the Act contains a
list of injuries said to result in permanent partial disablement and the corresponding loss
in earning capacity. Table 10.3 highlights the loss of earning capacity for various types of
injuries.
The compensation is calculated on the lines given in Box 10.2 for permanent total dis-
ablement, substituting the percentage of disability suffered and the appropriate “relevant fac-
tor” obtained from Schedule IV, as per the age of the concerned worker. For example, had the
worker needed “amputation through the shoulder joint”, loss in his earning capacity would
have been to the extent of 90 per cent. The compensation in this case would have to be com-
puted as under:
Compensation for partial permanent disability = 90 per cent of (compensation for total
permanent disability) = 90 per cent of (60 per cent × salary × relevant factor) = 90 per cent of
INR 413,826.
Temporary Disablement: In case of temporary disablement, payments equal to 25 per cent
of the workers’ wages shall be made at fortnightly intervals. In case the disablement lasts for
more than 28 days, the employer should make the payment on the 16th day from the day of
the disablement.
If the period of disablement lasts for less than 28 days, the payment shall be made after
the expiry of 3 days. This wait for 3 days is to ascertain how long the temporary disablement
will last—less than/equal to 28 days or more.
In case the employer makes any payment to the worker before the payment of this half-
monthly or lump sum amount, it shall be deducted from this. This provision envisages a
situation where an application is made when the worker is still undergoing treatment and
recovering.
In the case of temporary disablement, where half-monthly wages is to be paid, there is
provision for review of such amount, by the commissioner. Either party, supported by an
attested certificate of a medical examiner, can apply for the review to the commissioner.
The review might lead to the increase, decrease or the end of the half-monthly wages,
depending on the condition of the worker. In case the temporary disablement leads to a per-
manent disablement, then the review has the power to call for the lump sum compensation
to be paid to the worker. The lump sum the worker is entitled to excludes any amount that s/
he has already received in half-monthly payments.
Table 10.3
Description of Injury Per cent Loss of Earning Capacity
The loss of earning
Amputation through the shoulder joint 90 capacity in case of
permanent partial
Loss of all toes of one foot through a 20 disablement.
metatarsophalangeal joint
Loss of one eye, without complications, the other 40

being normal
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NOTICE OF ACCIDENT TO THE EMPLOYER. In the case of an accident

or an accident leading to death, a notice must be sent to the employer or any other person
who is employed to supervise work in the same establishment as soon as is practicable after
the occurrence of the accident.
The notice from the aggrieved party can be served to the employers either by sending the
notice by registered post to the residence or the office of the employer, or by entering such
notice into the notice book, maintained at the premises of the office.
T HE C O M M I SSI O NE R’ S P O W E R I N C ASE O F A N A C C I D EN T
RESULT I NG I N D E AT H. Anyone can report to the labour commissioner in case
of a worker being killed in an accident. If the employer feels that he is responsible to do so,
he must deposit the compensation with the commissioner within 30 days after the notice is
served. If he does not feel so, he must inform the commissioner of the grounds under which
he claims such exemption. On claiming such exemption, the commissioner may inform the
dependants of the deceased worker, leaving it open to them, whether they would want to
claim compensation or not.
In case the commissioner is aware of a fatal accident, he has the power to send a notice
to the employer (i.e., without receiving any application), requiring him to submit a statement
within a month’s time.
10.5 The Payment of Gratuity Act, 1972

It is a beneficient piece of social-security legislation that aims at providing a scheme for
providing gratuity to employees engaged in factories, mines, oil fields, plantations, ports,
railways, shops and other establishments. The gratuity was to be paid in the event of superan-
nuation, retirement, resignation, death or total disablement due to accident or disease.
10.5.1 Scope, Coverage and Definitions

The main purpose of the Payment of Gratuity Act is to provide a sum of payment to an employee
as a token of gratitude for having served the organization. This payment is intended to help the
employee provide for his/her needs after severance of his/her relationship with the employer.
An employee is eligible for receiving gratuity payment only after s/he has completed five
years of continuous service. S/he is said to be in continuous service, when s/he has provided
uninterrupted service during that period, till his/her:
Superannuation, or
Retirement, or
resignation, or
Death or disablement due to accident or disease.
This condition of five years is not necessary if the termination of the employment of an
employee is due to death or disablement. However, interruption on account of sickness, acci-
dent, leave, lay-off, strike, lockout, cessation of work not due to any fault of the employee will
not be considered as a break in service (Section 4).
Employee: Any person (other than an apprentice) employed on wages, in any establishment,
factory, mine, oilfield, plantation, port, railway company or shop, to do any skilled, semi-
skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of
such employment are express or implied, and whether or not such person is employed in
a managerial or administrative capacity; but does not include any such person who holds a
post under the central government or a state government, and is governed by any other Act
or by any rules providing for payment of gratuity.
Retirement: Termination of the service of an employee otherwise than on superannuation
Superannuation: In relation to an employee, it means the attainment by the employee of
such age as is fixed in the contract or conditions of service on the attainment of which the
employee shall vacate the employment
M10_SING6013_01_C10.indd 212 6/15/10 3:07:41 PM

In case of death or disablement, there is no minimum eligibility period. The amount of

gratuity payable shall be at the rate of 15 days’ wages based on the rate of wages last drawn, for
every completed year of service. The maximum amount of gratuity payable is INR 3,50,000.
Wages: Under this Act, it means all emoluments that are earned by an employee (in cash)
while on duty or on leave in accordance with the terms and conditions of his employment. It
includes dearness allowance but does not include any bonus, commission or house rent.
10.5.2 The Calculation of Gratuity

For every completed year of service, or part thereof, in excess of six months, the employer
shall pay gratuity to an employee at the rate of 15 days’ wages based on the rate of wages last
drawn by the employee concerned. Further, a month will be taken to comprise 26 days, i.e.,
30 days in a month adjusted for 4 weekly offs.
In the case of a piece-rated employee, daily wages shall be computed on the average
of the total wages received by him for a period of three months immediately preceding the
termination of his employment, and, for this purpose, the wages paid for any overtime work
shall not be taken into account.
The amount of gratuity payable to an employee shall not exceed INR 3,50,000.
For the purpose of computing the gratuity payable to an employee who is employed,
after his disablement, on reduced wages, his wages for the period preceding his disablement
shall be taken to be the wages received by him during that period, and his wages for the
period subsequent to his disablement shall be taken to be the wages as so reduced.
Nothing in this section shall affect the right of an employee to receive better terms of
gratuity under any award or agreement or contract with the employer.
An example of gratuity calculation under the Act is given in Box 10.5.
10.5.3 Gratuity Not Payable

The gratuity of an employee, whose services have been terminated for any act, wilful omis-
sion or negligence causing any damage or loss to, or destruction of, property belonging to the
employer, shall be forfeited to the extent of the damage or loss so caused.
The gratuity payable to an employee may be wholly or partially forfeited if:
i) The services of the employee have been terminated for his riotous or disorderly con-
duct or any other act of violence on his part, or
ii) The services of the employee have been terminated for any act, which constitutes an
offence involving moral turpitude, provided that such offence is committed by him
in the course of his employment.
BOX 10.5 THE CALCULATION OF GRATUITY
Dattatreya Bakshi joined the National Bank as a teller on 22 August 1975. On attaining
the age of superannuation on 31 December 2008, he was released from the services of the
bank. On the date of his superannuation, his basic pay, as an accountant, was INR 11,500
and his dearness allowance was INR 3,700. His gratuity was calculated as follows:
Monthly wage = INR 11,500 + INR 3,700 = INR 15,200
Completed years of service = 33
Gratuity = 15 days of wage for every completed year of service
Gratuity payable = INR 15,200 × 15/26 × 33 = INR 2,89,385
Note:
i) The factor 15/26 means 15 days’ wage in a month comprising 26 working days
(i.e. 30 days less 4 weekly off days).
ii) Maximum gratuity payable as per the Act is INR 3,50,000. However, if the employer
so desires, the maximum limit can be raised by him.
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10.5.4 Obligations of the Employer

a) The employer is usually required to submit a notice of opening of an establishment
to the controlling authority of the area in Form A containing names and addresses of
the establishment, employer, number of persons employed, nature of business, etc.
b) The employer shall display conspicuously a notice at or near the main entrance of
the establishment in bold letters in English and in a language understood by the
majority of employees.
c) It is the duty of the employer to determine the amount of gratuity as soon as it
becomes payable. Failure to do so shall render him liable to pay the interest at the
prevailing rate from the time taken.
d) The employer should obtain insurance in the prescribed manner for his liability for
the payment of gratuity under the Act or establish approved gratuity fund in the
prescribed manner.
10.5.5 The Process for Receiving Payment

1. A person who is eligible for payment of gratuity under this Act or any person autho-
rized, in writing, to act on his behalf shall send a written application to the employer,
for the payment of gratuity.
2. As soon as gratuity becomes payable, the employer shall, whether an application
has been made or not, determine the amount of gratuity and give notice in writing
to the person to whom the gratuity is payable and also to the controlling authority
specifying the amount of gratuity so determined.
3. The employer shall arrange to pay the amount of gratuity within 30 days from the date
it becomes payable to the person to whom the gratuity is payable. If the amount of
gratuity payable under Sub-section (3) is not paid by the employer within the period
specified in Sub-section (3), the employer shall pay, from the date on which the
gratuity becomes payable to the date on which it is paid, simple interest at a rate not
exceeding the rate notified by the central government from time to time for repay-
ment of long-term deposits. No such interest shall be payable if the delay in the pay-
ment is due to the fault of the employee and the employer has obtained permission
in writing from the controlling authority for the delayed payment on this ground.
10.6 Employees’ Provident Funds and

Miscellaneous Provisions Act, 1952
The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 was enacted to
provide a kind of social security to the industrial workers. It purports to be a social measure,
inducing employees to save a portion from their present earning for future.
10.6.1 Objectives
The Employees’ Provident Funds and Miscellaneous Provisions Act mainly provides retire-
ment or old-age benefits, such as provident fund, superannuation, pension, invalidation pen-
sion, family pension and deposit linked insurance.
Provision for terminal benefit of restricted nature was made in the Industrial Disputes Act,
1947, in the form of payment of retrenchment compensation. But this benefit is not available
to a worker on retirement, on reaching the age of superannuation or voluntary retirement.
The Employees’ Provident Funds and Miscellaneous Provisions Act is intended to pro-
vide wider terminal benefits to the industrial workers. For example, the Act provides for pay-
ment of terminal benefit on reaching the age of superannuation, voluntary retirement and
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retirement due to incapacity to work. In industrially advanced nations, provisions have been
made for old age and survivor’s pension. Due to prevailing conditions in India at the time
of enactment, institution of a pension scheme along the above lines was thought to be not
feasible. The Workmen’s Compensation and ESI Acts did not cover normal superannuation.
Any kind of gratuity scheme that depended solely on the employer would generate too mea-
gre an amount for any long-term relief. Under the circumstances, the EPF& MP Act (1952)
was thought to be most appropriate as it would institute compulsory and contributory fund
in which both the employer and the employee would contribute. The fund was thought to
also promote a habit of savings amongst employees.

The Act extends to the whole of India, except the state of Jammu and Kashmir.
It applies to every establishment of the following nature:
A factory engaged in any industry specified in Schedule I (of this Act) and in which
20 or more persons are employed
Any other establishment employing 20 or more persons or class of such establish-
ments which the central government may, by notification in the official gazette, spec-
ify in this behalf
Employees employed through a contractor in such establishments are also covered.
The central government may, through notification in the gazette, bring any establish-
ment, or a class of establishments, that employ 20 or more persons under the Act.
Once the Act applies to any establishment, it continues to be applicable even if the num-
ber of employees falls below 20 subsequently. There is no provision in the Act that deals with
the cessation of its application.
Section 16 of the Act exempts certain establishments from the application of this Act.
These are:
An establishment registered under the Co-Operative Societies Act, 1912 employing
less than 50 workers and without the aid of power
Any establishment belonging to or under the control of the central government or a state
government or establishments set up under a state or central Act and whose employees are
entitled to the benefits of contributory provident fund or old-age pension in accordance
with a rule framed by the respective government or the Act creating the establishment
Any newly set up establishment, from the date of set up to three years therefrom.
Section 17 of the Act empowers the appropriate government to exempt certain establish-
ments from the provisions of this Act provided, in its opinion, the provisions of the rules of
a similar scheme within the organization (rates of contribution, etc.) are not less favourable
than those provided for in the Act.
10.6.3 Definitions
A few important definitions in the Act will be useful to our understanding of the main
provisions:
Establishment: A factory engaged in any industry specified in Schedule 1 (of the Act) and in
which 20 or more persons are employed. Any other establishment employing 20 or more per-
sons that the central government may, by notification, specify in this behalf. Any establishment
employing even less than 20 persons can be covered voluntarily under Section 1(4) of the Act.
Basic Wages: All emoluments that are earned by an employee while on duty or on leave or
on holidays with wages in either case in accordance with the terms of the contract of employ-
ment and which are paid or payable in cash to him but does not include :
i) The cash value of any food concession
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ii) Any dearness allowance (that is to say all cash payments by whatever name called
paid to an employee on account of a rise in the cost of living), house-rent allowance,
overtime allowance, bonus commission or any other similar allowance payable to the
employee in respect of his/her employment or of work done in such employment
iii) Any presents made by the employer
Contribution: A contribution payable in respect of a member under a scheme or the contri-
bution payable in respect of an employee to whom the insurance scheme applies
Employee: Any person who is employed for wages in any kind of work, manual or otherwise,
in or in connection with the work of an establishment and who gets his wages directly or
indirectly from the employer and includes any person
i) employed by or through a contractor in or in connection with the work of the
establishment;
ii) engaged as an apprentice (but not as an apprentice as defined under the Apprentices
Act, 1961 or under the standing orders of the establishment)
Superannuation: In relation to an employee who is a member of the Pension Scheme, it
means the attainment by the said employee of the age of 58 years.
10.6.4 Provisions
Section 5 of the Act empowers the central government to create an Employee Provident Fund
Scheme for the establishment of the fund. The Act provides for three schemes, namely:
EPF (Employee Provident Fund Scheme, 1952)
EPS & F (Employee Pension Scheme and Fund, 1995)
EDLI (Employees Deposit Linked Insurance Scheme and Fund, 1976)
Sections 6, 6A and 6C make provisions for the rates of contributions to the Provident Fund,
the Pension Fund and the Employee Deposit Linked Insurance (EDLI). Various sub-sections
of Section 5 provide for the administrative wherewithal for the administration and institu-
tional framework for the schemes.
T HE PAYM E NT O F C O NT R I BUT I O N. The Act is applicable to employees of

establishments covered by the Act whose wage is INR 6,500 per month or below. However,
employees with wage more than this ceiling may also join the scheme if the employees and
the employer agree and with the approval of the government (PF Commissioner or an officer
so authorized in this regard).
The employer shall pay the contribution payable to the EPF, EDLI and Employees’
Pension Fund in respect of the member of the Employees’ Pension Fund employed by
him directly by or through a contractor.
It shall be the responsibility of the principal employer to pay the contributions pay-
able to the EPF, EDLI and Employees’ Pension Fund by himself in respect of the
employees directly employed by him and also in respect of the employees employed
by or through a contractor.
Over the years, there have been many amendments to the Act and currently, contri-
butions under various schemes stand as under the following heads:
Provident Fund:
For most of the establishments, the rate of contribution has been raised to 12 per cent
of wages, i.e.,
Employee contribution = 12 per cent
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Let us suppose the wage of an employee is INR 6,200. His contribution to PF, there-
fore, would be 12 per cent of INR 6,200, i.e., INR 744. The employer’s contribution,
too, would be INR 744. However, if an employee with wage of INR 8,000 has volun-
tarily joined the scheme, the contribution from both will be INR 960 each.
An employee can voluntarily contribute more than 12 per cent to the fund, but the
employer’s contribution shall remain limited to 12 per cent of wage.
Pension Fund:
Employee contribution = Nil
Employer’s contribution = 8.33 per cent out of the 12 per cent contribution of employer
made to the provident fund (calculated with a maximum wage ceiling of INR 6,500) shall
be transferred to this fund. The balance 3.67 per cent remains with the provident fund.
For example, in the above example, the employer’s total contribution to PF was INR
744. Therefore, 8.33 per cent of INR 6,200, i.e., INR 517 gets diverted to the pension
fund, whereas the balance 3.67 per cent (12 – 8.33), i.e., INR 227 remains with the
provident fund.
In addition, the government contributes up to 1.16 per cent of wage (up to a maxi-
mum wage limit of INR 6,500) to the pension fund.
Employee Deposit Linked Insurance Fund:
There is no contribution from the employee in this fund. The employer must contrib-
ute 0.5 per cent on the wage (subject to a maximum wage ceiling of INR 6,500) to the
fund and another 0.01 per cent as administrative expenses for running the scheme.
B ENEF IT S UND ER T HE S CH E M E S. These are schemes under social security

and, hence, the benefits under the scheme focus on providing sustenance during old age or
an eventuality when the earning capacity diminishes or ceases.
Provident Fund Scheme: An account of each contributing member is maintained by the PF
Organization. Interest is calculated on the basis of the rate declared every year by the cen-
tral government in consultation with the Board of Trustees. The fund with accruing interest
becomes payable at the time of superannuation or death.
Pension Fund Scheme: Provides for members to avail of pension on superannuation or
retirement and on disablement.
EDLI: EDLI provides life-insurance benefits to employees who are members of the Provident
Fund Scheme.
PENAL P ROV ISIO NS. For violating certain provisions of this Act, an employer is
liable to be arrested without warrants.
Defaults by the employer in paying contributions or inspection/administrative charges
attract imprisonment up to three years and fines up to INR. 10,000.
For any retrospective application, all dues have to be paid by the employer with damages
up to 100 per cent of arrears.
SUMMARY
Employees’ State Insurance Act: The Act was intended to provide certain benefits to employees
in case of sickness, maternity and “employment injury” and to
Employees’ State Insurance Corporation (ESIC) was consti-
make provisions for certain other matters in relevant thereto.
tuted under the Employees’ State Insurance Act, 1948, and
Employees’ State Insurance (Central) Rules, 1950. The ESI schemes through its hospitals and clinics have pro-
vided curative healthcare to workers all over India and have
The Act is applicable to all factories including those under
recently entered the area of occupational health.
the government other than seasonal factories.
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The ESI scheme is administered by the ESIC, an autonomous weeks immediately following the day of her delivery or
body that consists of Minister for Labour, Ministry of Health, her miscarriage.
five representatives of the central government, one represen-
䊊 Every woman shall be entitled to, and her employer
tative each from the states and one representative from all the
shall be liable for, the payment of maternity benefit at
union territories, five representatives of employees and five of
the rate of the average daily wage for the period of her
employers, two of medical profession and three Members of
actual absence immediately preceding and including
Parliament, and the Director General of Corporation.
the day of her delivery and for the six weeks immedi-
The ESI Corporation’s main function is to frame policies. ately following that day. The “average daily wage” means
the average of the woman’s wages payable to her for
The benefits under the ESI Act include:
the days on which she has worked during the period of
䊊 Sickness Benefit: At the rate of 7/12th of the daily three calendar months immediately preceding the date
average wage, benefit is given to the employee for a from which she absents herself on account of maternity,
maximum period of 91 days in one year. In diseases or one rupee a day, whichever is higher.
such as tuberculosis, leprosy, fracture and malignancy,
䊊 No woman shall be entitled to maternity benefit unless
the sickness benefits are extended to one year at half
she has actually worked in an establishment of the
the rate of sickness benefits.
employer from whom she claims maternity benefit, for a
䊊 Maternity Benefit: The benefit is given at the rate of full period of not less than 160 days in the 12 months imme-
wages for a period of 84 days in case of pregnancy and 6 diately preceding the date of her expected delivery.
weeks in case of miscarriage or MTP.
䊊 The maximum period for which any woman shall be
䊊 Disablement Benefit: In cash, 72 per cent of the wages is entitled to maternity benefit shall be 12 weeks, that is to
given to the temporary disabled person during the period say, not exceeding 6 weeks up to and including the day of
of disablement. In case of permanent disablement, the her delivery and 6 weeks immediately following that day.
payment is made at the same rate for the whole of his life
䊊 No deduction from the normal and usual daily wages
in the form of pension.
of a woman entitled to maternity benefit shall be made
䊊 Dependent Benefit: Widow or legitimate or adopted by reason only of (i) the nature of work assigned to her
child (up to the age of 18 years or till the daughter gets by virtue of the provisions of the Act; or (ii) breaks for
married) of the diseased person gets the cash payment nursing the child allowed to her under the provisions of
may be in the form of pension. the Act.
䊊 Funeral Benefit: An amount of INR 2,500 is paid to the 䊊 If a woman works in any establishment, after she has
eldest surviving member for the funeral purpose. been permitted by her employer to make herself absent
for any period, during such authorized absence, she
䊊 Medical Benefit: All members of the worker gets the
shall forfeit her claim to the maternity benefit for
medical cover including the outdoor treatment, domi-
such period.
ciliary treatment facilities by the panel system, specialist
services, ambulance services, and indoor services. The Workmen’s Compensation Act:
The Maternity Benefit Act: The Workmen’s Compensation Act is an act for payment of
This Act is a central legislation, which provides maternity compensation for injury by accident or occupational disease
benefits and is applicable to factories covered under the arising out of and in course of employment.
Factories Act, 1948. It extends to the whole of India.
It also applies to shops and establishments in which 10 or Compensation is something that constitutes an equivalent
more workers are employed or were employed on any day of or recompense; specifically payment to an unemployed or
the preceding 12 months. injured person or his dependents.
The provisions of this Act do not apply to any factory or Section 3 of the Act makes the employer liable to pay com-
establishment to which the provisions of Employee State pensation for injury caused to a workman by accident arising
Insurance Act, 1948 apply. out of and in the course of his employment.
The main provisions of the Act are as follows: The object of the Act is to ensure financial assistance and to
䊊 No employer shall knowingly employ a woman in any relieve the workman and his family members of the hardship
establishment during the six weeks immediately follow- they may suffer on account of a personal injury that may be
ing the day of her delivery or her miscarriage. Also, no caused to a workman in an accident arising out of and in the
woman shall work in any establishment during the six course of his employment.
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Any payment or allowance that the workman may have The employer is under obligation to pay the gratuity amount
received from the employer towards his medical treatment within 30 days from the date it becomes payable. Simple
shall not be deemed to be payment or allowance received by interest at a specified rate is payable on the expiry of the said
him by way of compensation. period. If there is a dispute as regards the amount of gratu-
ity payable or with regards the person to whom it is payable,
In case of death, the minimum amount of compensation
the employer shall deposit the said amount payable with the
fixed is INR 80,000 and INR 90,000 in case of permanent
controlling authority.
total disablement.
If the gratuity is not paid within the prescribed time, the
The existing wage ceiling for computation of maximum
controlling authority shall, after due inquiry, determine the
amount of compensation is INR 4,000.
amount payable and direct the employer to deposit the said
Under the Act, the state governments are empowered to amount.
appoint commissioners for workmen’s compensation for (i)
If an employer agrees to provide more benefits than the
the settlement of disputed claims, (ii) the disposal of cases of
benefits flowing from the Act, he can always have a private
injuries involving death, and (iii) the revision of periodical
scheme.
payments.
Gratuity can be forfeited for any employee whose services
The Payment of Gratuity Act:
have been terminated for any act, wilful omission or negli-
The Act provides for the payment of gratuity to workers gence causing damage or destruction to the property belong-
employed in every factory, shop and establishment or educa- ing to the employer.
tional institution employing 10 or more persons on any day
It can also be forfeited for any act that constitutes an offence
of the proceeding 12 months.
involving moral turpitude.
All the employees irrespective of status or salary are entitled
Where services have not been terminated on any of the
to the payment of gratuity on the completion of five years of
above grounds, the employer cannot withhold gratuity due
service.
to the employee.
In case of death or disablement, there is no minimum eligi-
The Employees’ Provident Funds and Miscellaneous Provisions
bility period.
Act, 1952:
Gratuity is payable at the rate of 15 days’ wages for every
A piece of social welfare legislation
year of completed service or part thereof in excess of
6 months. A beneficent measure, enacted for the purpose of institu-
tion of provident fund for employees in factories and other
The maximum amount of gratuity payable is INR 3.5 lakhs.
establishments.
Any person to whom the gratuity amount is payable shall
It is an effective old-age and survivorship benefit.
make a written application to the employer. The employer
is required to determine the amount of gratuity payable and The provisions are intended for a better future of the indus-
give notice in writing to the person to whom the same is trial worker on his retirement and also for his dependants in
payable and to the controlling authority, thereby specifying the event of his death in the course of employment.
the amount of gratuity payable.
KEY TERMS
confinement 201 insurable employment 198 sickness 195
continuous service 212 insured person 198 superannuation 201
contribution 197 maternity benefit 202 temporary disablement 199
delivery 204 occupational disease 199 wages 197
disablement 195 permanent partial disablement 199 workmen’s compensation 206
employment injury 196 permanent total disablement 199
gratuity 196 retirement 195
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REVIEW QUESTIONS
1 Which establishments are covered under the ESI Act? 21 Is a woman entitled to any leave with wages for illness in
Indicate whether the following would be covered: petrol addition to the period of absence allowed to her under the
pump, cinema theatre, automobile workshop, casual workers provisions of the Maternity Benefit Act?
employed for housekeeping in an establishment.
22 Is a woman entitled to any leave with wages for miscarriage?
2 Who are required to be insured under the ESI Act? Does the
23 Define the following terms used in the Workmen’s
Act apply to an apprentice?
Compensation Act, 1923:
3 What components of wages are covered for ESI contribu-
a) Partial disablement
tion? Does conveyance allowance form part of wages within
the ambit of Section 2(22) of the Act? b) Total disablement
4 Explain the benefits provided under the ESI Act. c) Workman
5 Is an insured person who ceases to be in an insurable d) Dependent

employment on account of permanent disablement eligible
24 Define the term “out of and in the course of employment”
to receive any benefits under the Act?
with examples. If a person has an accident while travelling to
6 Does a conviction of an insured person under the ESI Act work , would it be covered under this definition?
disentitle him to any benefits admissible under the Act?
25 How is the amount of compensation payable to an injured
7 Is a retired insured person eligible to receive any benefits workman calculated under the Workmen’s Compensation
under the ESI Act? Act, 1923?
8 Can a person, who was not an insured person at the time of 26 State the rules regarding the notice of accident for making a
his retirement but who remained an insured person at some claim under the Act.
stage of his employment, claim medical benefits?
27 Under what circumstances is an employer not liable to pay
9 Is it permissible for any person to draw a benefit of the same compensation under the Workmen’s Compensation Act?
kind under the ESI Act and also under any other Act?
28 When is lump sum compensation payable under the
10 What are the objectives of the Maternity Benefit Act, 1961? Workmen’s Compensation Act?
11 What establishments are covered under the Maternity 29 Define the following terms as used in the Payment of
Benefit Act? Gratuity Act , 1972:
12 Is there any justification for denying the benefits of the a) Continuous service
Maternity Benefit Act to women workers on the ground that
b) Completed year of service
they are not regular employees but they are on the muster roll?
c) Employee
13 What are the restrictions placed by the Maternity Benefit Act
on the employment of women? d) Employer
14 To whom is maternity benefit payable in case of death of a 30 When does gratuity become payable and what is the basis of
woman? the calculation of gratuity?
15 What are the restrictions placed by the Maternity Benefit Act 31 What are the rules regarding nomination by an employee
on the termination of employment of a woman? under the Payment of Gratuity Act?
16 What is the time for payment of maternity benefit? 32 What are the rights and obligations of the employers under
the Payment of Gratuity Act?
17 What is the period for which a woman is entitled to mater-
nity benefit and what is the rate of the benefit? 33 Which establishments are covered by the PF&MP Act?
18 Is a woman, who is entitled to maternity benefit, also entitled 34 Would the PF&MP Act continue to apply to an establish-
to any medical bonus? ment that has closed its manufacturing activities and does
not employ a single employee?
19 Can a woman claim the maternity benefit from her employer
if she works elsewhere during the period for which she has 35 Is the PF&MP Act applicable to a factory that is closed down
been permitted to make herself absent under the provisions but is employing a few employees to look after the assets of
of the Act? the establishment?
20 Is it permissible under the Act to exempt any establishment 36 Is the PF &MP Act applicable to charitable institutions?
for the provisions of the Maternity Benefit Act?
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37 Compute the contributions to be made by the employer and fund, pension fund and EDLI? Is this employee eligible to be
the employee (whose wage is INR 7,500) towards provident covered under the Act?

1 It is not the intent of the ESI Act but its implementation 4 Most of the social-security legislations have ceased to be
in terms of medical facilities and treatment available to its relevant in the new economy. These legislations mostly
members that would fulfil the constitutional provisions of covered employees in the organized sector, who don’t need
socio-economic justice. Discuss. them. Critically examine the above statement with reference
to the coverage and provisions of the major pieces of social-
2 Do you think the restriction placed on discharge or dis-
security legislations in India.
missal of a woman during pregnancy on account of absence
is appropriate? Should it prevail irrespective of whether the 5 There is a need for rationalization of various social-security
absence was authorized or unauthorized? legislations so as to avoid contradictions and duplica-
tion. Examine the above with regard to the ESI Act, the
3 In IT and ITES sector, attrition is the highest averaging
Workmen’s Compensation Act and the Maternity Benefit
around 12–13 per cent. Why do you think the social-security
Act. Suggest an outline for a coherent legislation covering
cover under the gratuity scheme does not help employers
the provisions of these three Acts.
retain talent even for the five-year period that makes an
employee eligible for the benefit?
D E B AT E
1 The Workmen’s Compensation Act is biased against the 2 In terms of employee relations management, the provision of
employer as it covers accidents beyond the control of the gratuity is a good retention strategy.
management.
Mr Sawant’s Liability has 500 employees on its rolls, most of them being engineers
and technicians. Due to a competitive market, the firm does
Mr Sawant has employed a driver whose wages are reimbursed
its best to retain top talent and, therefore, most of the employ-
by the company. Mr Sawant has an Act-only policy covering his
ees draw fixed salary of more than INR 10,000 per month.
private car. While driving the vehicle after dropping Mr Sawant
The Managing Director, Mr Shashikant, one day, while going
at his office, the vehicle collides with a truck and the driver dies
through the morning correspondence, saw a letter addressed
on the spot. Being an old car, Mr Sawant had nothing much to
to him by the Metallica Diploma Engineers’ Association.
lose and that is why he had not taken a comprehensive policy.
Amongst other things, the letter mentioned a “demand” from
However, the family of the driver lost their income source.
its members to become a member of the Provident Fund
Is Mr Sawant liable to pay compensation to the dependants of the Scheme. Mr Shashikant remembered having told by a consul-
driver? Specifically state the relevant provisions of the Act under tant that Metallica was not obliged to make any contributions
which he is liable. under provident fund.
If the post-mortem reported an unacceptable level of alcohol in the Going through the provisions of the relevant Act, can you suggest
driver, will Mr Sawant be liable to pay compensation? Why or why not? a line of argument that Mr Shashikant may take while discussing
the issue with the Diploma Engineers?
The Provident Fund Scheme at Metallica Structurals
Metallica Structurals Private Limited is a company in the con-

struction business. The annual turnover is INR 25 billion and it
NOTES
1 V. G. Goswami, Labour and Industrial Law, eighth edition
(Allahabad: Central Law Agency, 2004), p. 384.
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chapter eleven
11.1 The History of Wage Legislation After reading this chapter, you will be able to:
11.2 The Payment of Wages Act, 1936 • Appreciate the need for and limitations of
11.3 The Minimum Wages Act, 1948 wage legislations in India
11.4 The Payment of Bonus Act, 1965 • List the major pieces of legislations related
to wages in India
• Understand the main provisions related to
these legislations
• Prepare a check-list for compliance to these
provisions
Strike for Higher Bonus

About 1,000 employees of Reliable Industries (RT) working at its plants in Hyderabad threatened to go on strike just before
the festival season in September, 2008, demanding a hike in bonus offered by the management. The management had
offered INR 33,000 as bonus. All three labour unions affiliated with different political parties gave notice to the manage-
ment of the company and the Labour Commissioner in this regard. Hydrocarbons Limited was earlier a PSU, but later, the
government divested its holding and sold it off to RI, a conglomerate in the hydrocarbons and petrochemicals, and merged
with it. Before the merger, the employees worked for the government-owned Hydrocarbons India Limited (HIL). Union
leaders said RI’s bonus offer of INR 33,000 was not acceptable to them, since the previous year, it was INR 40000.
The unions questioned the Reliable management on fixing different amounts of bonus for employees working in plants
located in different parts of the country. Union leaders said the company’s (RIL’s) profit is more than INR 120 billion.
The leaders accused the management of not providing them with production data-sheet and computation sheet despite
repeated demand. They said these demands were raised in a meeting between local management of the company and the
union leaders the previous month.
The workers have requested RIL management not to deposit any bonus money into their accounts without a discussion and
an agreement as to the quantum of bonus.
M11_SING6013_01_C11.indd 222 6/15/10 3:32:50 PM

Wage Legislation
Wages are miserably low and employment too scarce and insecure in the rural and in the unorganized sectors
to mitigate poverty and deprivation; while in the organized sector, the wages are rising and employment is
secure.
The opening vignette concerning employees threatening to go on strike over bonus issues raises a few
questions. What is bonus? Is it a right of the workers? Or is it a form of coercion through industrial
action? From where does the right originate? Are all wage earners entitled to a “bonus”? Who decides
the “amount” of bonus to be paid? Is it negotiable? Does a loss-making company have an obligation
to pay bonus to its employees? Do employees have a right to a portion of profits of the company?
In a free market, is there a need for the government to regulate the wages of labour? Why and how
could the wages be regulated keeping in mind the capacity of an industry to pay? What is the objec-
tive of the State in such regulation?
In answering such questions, we will explore the legislations related to wages and bonus (a con-
tentious issue and frequently in news) in this chapter.
11.1 The History of Wage Legislation

Article 43 of the Constitution of India states “the State shall endeavour to secure by suitable legisla-
tion or economic organization or in any other way, to all workers—agricultural, industrial or other-
wise, work, a living wage, conditions of work ensuring decent standard of life and full enjoyment of
leisure and social and cultural opportunities”.
The 15th Indian Labour Conference (1957) resulted in the formulation of the following norms
as a guide for all wage-fixing authorities, including minimum wage committees, wage boards, and
judicatures:
In calculating the minimum wage, the standard working-class family should be taken to com-
prise three consumption units for one earner; the earnings of women, children and adolescents
should be disregarded.
i) Minimum food requirements should be calculated on the basis of a net intake of 2,700 calories.
ii) Clothing requirements should be estimated at a per capita consumption of 18 yards, which
would give for the average worker’s family of four, a total of 72 yards.
iii) In respect of housing, the norm should be the minimum rent charged by the government
in any area for houses provided under the subsidized Industrial Housing Scheme for low-
income groups.
iv) Fuel, lighting and other “miscellaneous” items of expenditure should constitute 20 per cent
of total minimum wage.
Fair Wage: The wage that is above the minimum wage, but below the living wage. Between the lower
limit set by the minimum wage and the upper limit set by the living wage, the actual fair wage must
be determined in the light of the following factors:
M11_SING6013_01_C11.indd 223 6/15/10 3:32:51 PM

The productivity of labour

The prevailing rates of wages in the same/similar occupation in the same or neigh-
bouring locations
The level of national income and its distribution
The place of industry in the national economy of the country
Living Wage: This must provide not merely for bare sustenance but also for the preservation
of efficiency of the worker and must include provision for some measure of education, medi-
cal requirements and amenities.
According to the report of the Committee on Fair Wages, 1954, for the purpose of deter-
mination of fair wages, the Wage Board should take into consideration factors like the degree
of skill required to work, the fatigue involved, the training and experience of the worker, the
responsibility undertaken, the mental and physical requirements for the work, the disagree-
ableness or otherwise of work and the hazard involved in the work. The board is required
to make due allowance for a fair return on capital, remuneration to management and a fair
allocation to reserves and depreciation.
11.1.1 The Need for Wage Legislation

The main objectives of State regulation of wages have been:
a) The prevention of sweating in industries deploying illiterate and unorganized
workers
b) Promoting industrial peace
c) Speeding up the pace of economic recovery
d) Preventing inflationary pressure and maintaining economic stability
e) Facilitating the achievement of the national-income-distribution policy and the
programme of economic development
f) Narrowing the gap between marginal productivity of labour and the actual level of
wages as the average
11.1.2 The Regulation of Wages

Wage regulation through legislations has been executed mainly through the following:
i) Prescribing minimum wages (Minimum Wages Act,1948)
ii) Regulating the payment of wages (Payment of Wages Act, 1936)
iii) Compulsory conciliation and arbitration of wage disputes (Industrial Disputes
Act, 1947)
iv) Setting up of wage boards
v) The payment of bonus (Payment of Bonus Act, 1965)
11.2 The Payment of Wages Act, 1936

The Payment of Wages Act, 1936 was enacted to regulate the payment of wages to
workers employed in industries and to ensure a speedy and effective remedy against
illegal deductions and/or unjustified delay caused in the payment of wages to them.
The Payment of Wages Act, 1936 is a central legislation, which applies to the persons
M11_SING6013_01_C11.indd 224 6/15/10 3:32:52 PM

Wage Legislation 225
Figure 11.1
Payment at regular interval The objectives of the
Payment of Wages Act.
.
Payment of Wages Act Why? Payment in a particular form
Payment without unauthorized

deductions
employed in factories, industries and other establishments. The establishments where it

is applicable include:
Factory
Railway
Industrial or other establishment such as:
Tramway, motor transport service
Air transport service
Dock, wharf, jetty
Mine, quarry, oil field
Plantation
Workshops in which articles are produced, adapted or manufactured
Construction
Any other covered through notification
Figure 11.1 captures the three-pronged objectives of the Act.
11.2.1 Coverage
It covers every person who is employed in any of the establishments (defined in the Act)
and drawing an average wage of up to INR 6,500 per month (as amended with effect from
6 September 2005).
Wage: The term “wages”

11.2.2 Important Terms means all remuneration
(whether by way of salary,
A few important definitions are quoted verbatim from the Act: allowances or other-
The term “wages” means all remuneration (whether by way of salary, allowances wise) expressed in terms
or otherwise) expressed in terms of money or capable of being so expressed, which of money or capable
would, if the terms of employment express or implied were fulfilled, be payable to a of being so expressed,
which would, if the terms
person employed in respect of his employment or of work done in such employment, of employment express
and includes — or implied were fulfilled,
be payable to a person
a) Any remuneration payable under any award or settlement between the parties or employed in respect
order of a court of his employment or
of work done in such
b) Any remuneration to which the person employed is entitled in respect of overtime employment.
work or holidays or any leave period
M11_SING6013_01_C11.indd 225 6/15/10 3:32:52 PM

c) Any additional remuneration payable under the terms of employment (whether

called a bonus or by any other name)
d) Any sum, which by reason of the termination of employment of the person employed,
is payable under any law contract or instrument, which provides for the payment of
such sum whether with or without deductions but does not provide for the time
within which the payment is to be made
e) Any sum to which the person employed is entitled under any scheme framed under
any law, but does not include—
i) Any bonus (whether under a scheme of profit-sharing or otherwise) which does
not form part of the remuneration payable under the terms of employment or
which is not payable under any award or settlement between the parties or order
of a court
ii) The value of any house-accommodation or of the supply of light, water, medical
attendance or other amenity or of any service excluded from the computation of
wages by a general or special order of the state government
iii) Any contribution paid by the employer to any pension or provident fund and
the interest that may have accrued thereon
iv) Any travelling allowance or the value of any travelling concession
v) Any sum paid to the employed person to defray special expenses entailed on
him by the nature of his employment
vi) Any gratuity payable on the termination of employment in cases other than
those specified in Sub-clause (d).
11.2.3 Provisions
The Act prescribes certain benefits:
Pay Day: Wages must be paid on a working day and not on a holiday. When there are less
than 1,000 persons employed, the wages shall be paid before the expiry of the seventh day
of the following month. When there are more than 1,000 workers, the wages are to be paid
before the expiry of the 10th day of the following month.
Wage Period: The period to be fixed for paying wages to an employed person must not exceed
one month. That means, an employer can choose to pay wages to a person employed by him
o
Wage Periods: Not to ffor a period of every week or every fortnight, but not for a period of every two months or
exceed one month eevery three months.
Time: Before expiry of Terminal Wage: When the employment of any person is terminated, the wages earned by
T
10th/7th day follow- him must be paid before the expiry of the second working day from the day of termination.
h
ing wage period ( > /
<1,000) Mode of Payment: Wages must be paid in current coin or currency notes or in both and not
M
Termination: Second iin kind. It is, however, permissible for an employer to pay wages by cheque or by crediting
working day on which tthem in the bank account if so authorized in writing by an employed person.
employment is termi- Deductions from Wages: The Act prohibits all kinds of deductions except those that are
D
nated authorized
a by or under the Act (Section 7). Authorized deductions include fine, deduction
Working Day: Wages ffor amenities and services supplied by the employer, advances paid, over-payment of wages,
to be paid on a work- lloan, granted for house-building or other purposes, income tax payable, in pursuance of
ing day
tthe order of the court, provident fund contributions, cooperative societies, premium for life
Medium: Payment in
currency, not kind. iinsurance, contribution to any fund constituted by employer or a trade union, recovery of
cheque/bank transfer llosses, ESI contribution, etc.
on written consent Deduction for Fines (Section 8):
D
Only authorized
“deductions” from i) No fine shall be imposed on any employed person save in respect of such acts and
wages are permitted omissions on his part as the employer, with the previous approval of the state gov-
ernment or of the prescribed authority, specified by notice under Sub-section (2).
M11_SING6013_01_C11.indd 226 6/17/10 2:29:45 PM

ii) A notice specifying such acts and omissions shall be exhibited in the prescribed
Kinds of Deductions
manner on the premises in which the employment is carried on or in the case of
person employed upon a railway (otherwise than in a factory), at the prescribed Fines
place or places. Deduction for absence
from duty
iii) No fine shall be imposed on any employed person until s/he has been given an Deduction for damage to
opportunity of showing cause against the fine, or otherwise, than in accordance with or loss of goods entrusted
to custody
such procedure as may be prescribed for the imposition of fines.
Deduction for house
iv) The total amount of fine that may be imposed in any one wage period shall not accommodation
Deduction for amenities
exceed 3 per cent of the wages payable during that period.
Deduction for recovery of
Absence Without Reasonable Cause: Absence for whole or any part of the day—if ten or advances/loans
Deduction for income tax
more persons are absent without reasonable cause, there should be deduction of wages up to
payable
eight days (Section 9). Statutory deduction (court
Deduction for Damage or Loss: For default or negligence of an employee resulting in loss. or magistrate or compe-
Show-cause notice has to be given to the employee before effecting any deduction. tent authority)
Other authorized deductions can be: And so on….
Deduction for amenities and services

Recovery of advances and interests
Deduction for overpayment of wages, etc.
All authorized deductions that can be made from the wages are defined in the Act. The em-
ployer cannot make arbitrary deductions. (See Box 11.1.)
11.2.4 The Enforcement Machinery

The central government is responsible for the administration of the Act in railways, mines, oil-
fields and air transport services, while state governments are responsible in factories and other
industrial establishments. In respect of major ports, state governments have appointed officers
of the Central Industrial Machinery as inspectors for enforcing the Act.
11.2.5 Penal Provisions

In respect of any contravention to the provisions of the Act including unauthorized deduc-
tions and delayed payments, the Act provides for various penal provisions against the default-
ing employer.
11.3 The Minimum Wages Act, 1948

The need for a country to have minimum-wage-fixing machinery was stressed by the
International Labour Organization way back in 1928. Twenty years later, our country
passed the Minimum Wages Act in 1948. The reason given by the government for passing
What is the responsibility of an employer in respect of wages remaining unpaid on account

of death of an employed person when the whereabouts of the employed person are not
known?
Is deducting some amount or union levies from wages of employees and paying the
same to the union valid?
A group of 10 employees were absent for 2 days without intimation, in connection
with a new order for deployment of manpower and specific job allocation. What is the
maximum amount that may be deducted on account of such absence from duty?
M11_SING6013_01_C11.indd 227 6/15/10 3:32:57 PM

the Act was that the workers’ organizations in the country were poorly developed and,
consequently, their bargaining power also was very poor. A tripartite committee—The
Committee on Fair Wage—was set up in 1948 to provide guidelines for wage structures
in the country. The report of this committee was a major landmark in the history of
formulation of wage policies in India. Its recommendations set out the key concepts of
the living wage, minimum wage and fair wage besides setting out guidelines for wage
fixation.
Article 39 of the Constitution states that the State shall direct its policy towards securing
that:
a) The citizens, men and women equally, shall have the right to an adequate means of
livelihood, and
b) There is equal pay for equal work for both men and women
11.3.1 Objectives, Scope and Coverage

As the name suggests, the Minimum Wages Act aims at establishing a mechanism for fixing
minimum wage rates in various kinds of employments.
It extends to the whole of India. It applies to any person who directly, or through a con-
tractor, employs one or more employees in any of the “scheduled” employment for which
minimum wages have been fixed under this Act.
11.3.2 Important Terms

Wages: All remuneration capable of being expressed in terms of money, which would, if the
terms of the contract of employment express or implied were fulfilled, be payable to a person
employed in respect of his employment or of work done in such employment and includes
house-rent allowance but does not include—
i) The value of (a) any house accommodation, supply of light, water, medical atten-
dance, or (b) any other amenity or any service excluded by general or special order
of the appropriate government
ii) Any contribution paid by the employer to any person, fund or provident fund or
under any scheme of social insurance
iii) Any travelling allowance or the value of any travelling concession
iv) Any sum paid to the person employed to defray special expenses entailed on him by
the nature of his employment
v) Any gratuity payable on discharge of employees or for the payment of wages
Employee: Any person who is employed for hire or reward to do any work, skilled or
unskilled, manual or clerical, in a scheduled employment in respect of which minimum
rates of wages have been fixed; and includes an out-worker to whom any articles or materi-
als are given out by another person to be made up, cleaned, washed, altered, ornamented,
finished, repaired, adapted, or otherwise processed for sale for the purposes of the trade or
business of that other person where the process is to be carried out either in the home of
the out-worker or in some other premises not being premises under the control and man-
agement of that other person; and also includes an employee declared to be an employee
by the appropriate government; but does not include any member of the armed forces of
the union
Cost of Living Index Number: In relation to employees, in any scheduled employment in
respect of which minimum rates of wages have been fixed, the index number ascertained and
declared by the competent authority by notification in the official gazette is to be the cost of
living index number applicable to employees in such employment
M11_SING6013_01_C11.indd 228 6/15/10 3:32:58 PM


The Act prescribes the minimum rates of wages payable to employees for different scheduled
employments for different classes of work and for adults, adolescents, children and appren-
tices depending upon different localities. The employer is required to pay to every employee
stipulated in the schedule of employment, at a rate not less than minimum rates of wages as
fixed by notification by not making deduction other than prescribed.
FIXAT IO N O F M INIM UM R AT E S O F WAG E S. The appropriate gov-

ernment is empowered to fix minimum rates of wages and to review at such intervals not
exceeding five years the minimum rates so fixed and revise them if required. The government
can also fix minimum wages for (a) time work (b) piece work at piece rate (c) piece work for
the purpose of securing to such employees on a time-work basis (d) overtime work done by
employees for piece work or time-rate workers.
The government has to take into account many factors before notifying any changes in
minimum wage. The live case in Box 11.2 shows the different interest groups that must be
addressed before arriving at a decision. Often, wages in an industry are arrived at through the
collective bargaining between the employers’ group and the employees’ group.
Notice that in the case presented in Box 11.2, there are many contextual issues that come
into play with minimum-wage notification. More often than not, it becomes a collective bar-
gaining issue rather than a simple process of notifying a revision based on economic data.
The Act has built in provisions for consultation, as we will see later in the chapter.
M I N I M U M R AT E S O F WA G E S
1. Any minimum rate of wages fixed or revised by the appropriate government may
consist of—
i) A basic rate of wages and a special allowance, e.g., cost-of-living allowance
ii) A basic rate of wages with or without a cost-of-living allowance and cash value
of concessions for the supply of essential-commodities allowance
BOX 11.2 MINIMUM WAGE NOTIFICATION: A REAL-LIFE CASE
On 14 March 2008, the Tamil Nadu government proposed a draft minimum wage noti-
fication of a daily rate of Rs 101.52 for tea-plantation workers. Reacting to the draft,
management sources stated that this wage “would be a death knell for the plantations in
the State”.
Expressing concern over the proposed hike and its adverse impact on plantations, the
United Planters Association of Southern India (UPASI) said, “If the state government does
not give up the present proposal of fixing the minimum wage above the prevailing rate
negotiated between the trade unions and the planters’ associations, it would signal the
end of collective bargaining.”
The apex body of the plantation industry in South India has not only appealed to the
state government to retrace its steps, but has sought the Centre’s intervention in dissuad-
ing the Tamil Nadu government from going ahead with the proposed wage plan.
“The extra wage burden arising from the minimum wages proposed by the state
government will add Rs 7–8 per kg to the cost of production, thereby making the entire
industry terminally sick. The plight of the small growers could be worse; they may even be
wiped out,” sources pointed out.
The current notified wage is much higher than the minimum wage of Rs 76.65 in
Karnataka as on March 2008.
Source: L. N. Revathy, “Tea Plantations Upset over Minimum Wage Proposal”, The Hindu
Business Line, 2 April 2008.
M11_SING6013_01_C11.indd 229 6/15/10 3:32:58 PM


Is an employer, who is not paying basic wages and cost-of-living allowance separately as
fixed under the Act, but who is paying wages more than the minimum prescribed rates
under the Act, committing any illegality?
Can attendance bonus be treated as part of the minimum wage fixed under the Act?
Can the supply of essential commodities at concessional rates form part of the mini-
mum wage?
iii) An all-inclusive rate, i.e., basic wage, cost-of-living allowance and cash value of
concessions on essential commodities
The questions based in Box 11.3 are based on case laws. The purpose is only to show that you
can, in most cases, guess the correct interpretation on an approach based on common sense
and understanding of the spirit of the enactment.
T HE P R O C E D UR E F O R F I XI NG AND R E VI SI NG M I N I MU M R ATES
O F WAG E S. For fixing the minimum wages, the appropriate government may follow
one of the following two procedures:
Committee Procedure: The appropriate government may appoint a committee
comprising representatives of employers and employees and independent members
There are two basic pro-
(not exceeding 1/3 of the committee’s strength). The recommendations of the com-
cedures for determining mittee are published in the official gazette and come into effect after expiry of three
the minimum wages: months.
1. Committee Notification Procedure: In this procedure, the government notifies the proposed
Procedure: A tripartite revision in the official gazette. A minimum of two months’ period is provided for
committee compris-
ing employers’ and
persons likely to be affected by the proposal to react and send their representations.
employees’ represen- The government should also consult the Advisory Board.
tatives and indepen-
dent members
The exhibit in Box 11.41 is an extract from an actual notification issued by the Tamil Nadu
2. Notification government
g revising the minimum wages for the leather and manufacturing industry.
Procedure:
Notification of pro-
posed changes by
the government. The BOX 11.4 LABOUR AND EMPLOYMENT (J1) DEPARTMENT G.O.(2D) NO. 30
final revision based
on consideration of Dated: 27.03.2007
objections by affected Read:
parties. 1. G.O.(2D) No.28, Labour and Employment Department dated 3.4.2003
2. From the Commissioner of Labour, Chennai-6, Letter No.Z1/58373/2002, dated
14.9.2004.
3. From the Commissioner of Labour, Chennai – 6, Letter No.Z1/58515/2002 dated
19.01.2006.
ORDER
In the Government Order first read above, a preliminary Notification containing propos-
als to revise further the minimum rates of wages for employment in Tanneries and Leather
Manufactory was issued and objection and suggestion were invited from the persons likely
to be affected by such revision.
1. After examining the objection and suggestion with regard to the Preliminary Notification,
the Government have decided to confirm the preliminary Notification.
2. The appended Notification will be published in the Tamil Nadu Government Gazette
both in English and Tamil. The Secretary to Government, Tamil Development Culture
and Religious Endowments (Translation) Department, Secretariat, Chennai-600 009
M11_SING6013_01_C11.indd 230 6/15/10 3:32:58 PM

is requested to send the Tamil translation of the Notification to the Works Manager,
Government Central Press, Chennai – 600079.
(BY ORDER OF THE GOVERNOR)
APPENDIX
Notification
In exercise of the powers conferred by clause (b) of sub-section (1) of section 3 and sub-sec-
tion (2) of section 5 of the Minimum Wages Act, 1948 (Central Act XI of 1948) and in super-
session of the Labour and Employment Department Notification No.II(2)/LE/868/2000,
published at pages 398 and 399 of Part II-Section 2 of the Tamil Nadu Government
Gazette, dated the 9th August, 2000, the Governor of Tamil Nadu after consultation with
the Advisory Board, hereby revises the minimum rates of wages payable to the classes of
employees in the employment in Tanneries and Leather Manufactory in the State of Tamil
Nadu specified in column (1) of the Schedule below, as specified in the corresponding
entries in column (2) thereof, the draft proposal of the same having been previously pub-
lished as required by clause (b) of sub-section (1) of section 5 of the said Act.
3. This Notification shall come into force with effect on and from the date of its publication
in the Tamil Nadu Government Gazette.
// TRUE COPY //
SECTION OFFICER
THE SCHEDULE (Abridged)
EMPLOYMENT IN TANNERIES AND LEATHER MANUFACTORY
Classes of Employee
LIMEYARD
(1) Helpers 57.00
(2) Flashers 58. 00
(3) Scudders 58.00
(4) Goat Skin Knifers 58.00
TANNING AND DYEING DEPARTMENT
(1) Helpers 57.00
(2) Drum Boys 57.00
(3) Shavers 60.00
(4) Splitters 60.00
(5) Shaving Learners 57.00
(6) Bamming Helpers 57.00
EXPLANATIONS
(i) The employees shall be paid dearness allowance in addition to the minimum wages
specified above. For calculation of dearness allowance, the base shall be taken as
2174 (base 1960 = 100) being the All India Average of Consumer Price Index
Number for the year 2000. For further raise of one point over and above 2174
points, an increase of 2.5 paise shall be paid per day.
(ii) Where the nature of work is the same or work of similar nature is done, no distinction
in payment of wages should be made as between men and women workers.
(iii) Where piece rate workers are employed in any Tannery and Leather Manufactory,
the Wages paid to each of them for a normal working day shall not be less than the
minimum rates of wages fixed for that category.
(iv) To arrive at daily wages, the monthly wages shall be divided by 26.
(v) To arrive at the monthly wage, the daily wages plus the daily Dearness Allowance
would be multiplied by 30.
(vi) Wherever the existing wages are higher than the minimum wages fixed herein, the
same shall be continued to be paid.
TRUE COPY
SECTION OFFICER
M11_SING6013_01_C11.indd 231 6/15/10 3:32:59 PM

The exhibit in Box 11.4 is based on Notification Procedure for the leather and tannery
industry in Tamil Nadu. Read it carefully to notice how every provision of the Act has
been taken care of and also the “process” that has been followed. Likewise, notifications
under the Minimum Wages Act, 1948 can also be notified in the official gazette through the
Committee Process. It might be a good idea to look for such a notification and compare the
difference.
WOR KI NG H O UR S AND OVE RT I M E . Overtime hours are to be reckoned in

terms of working hours in a normal working day and the payment for every hour or for part
of an hour so worked in excess shall be at the overtime rate, double the ordinary rate. In case
the Factories Act applies, then it should be at whichever rate is higher.
THE PROCEDURE FOR MAKING CLAIMS UNDER THE ACT. The procedure for
making a claim is as follows:
a) An employee having any claim under the Act has to make an application to the
authority appointed under the Act.
b) Such application can be made by the employee himself/herself, or any legal practi-
tioner or any official of a registered trade union.
c) Application has to be made within six months from the date on which the claim
amount became payable.
d) In appropriate case, the authority can, over and above directing the payment of the
difference between minimum wages payable and wages actually paid, award com-
pensation up to 10 times the amount of the difference.
e) The amount directed to be paid by the authority can be recovered as if it were a fine
imposed by a magistrate.
f) Every direction of the authority will be final (Section 20).
11.4 The Payment of Bonus Act, 1965

“Bonus” is one of the most contentious issues in the area of wage legislations. Starting from its
first use during the early 1920s, bonus has neither satisfied the employee, nor the employer.
Starting as an ex gratia payment, over the years, it has acquired the form of obligatory pay-
ment through the enactment of legislation (Payment of Bonus Act, 1965) in this regard. The
opening vignette describes a typical “situation” relating to payment of bonus and the com-
plexities of the issues surrounding it.
Interestingly, the term “bonus” is not defined in the Payment of Bonus Act, 1965.
The Meriam-Webster Dictionary defines “bonus” as “something in addition to what is
expected or strictly due” or “money or an equivalent given in addition to an employee’s usual
compensation”.
In common parlance, bonus is regarded as an ex gratia payment made by the employer to
his workers to provide encouragement for the extra effort by them in the production process.
Sometimes, it also represents a desire of the management to share its gains with the workers,
who are vital to the production process and who contribute to the income and profits of the
enterprise.
The payment of “bonus” started in the cotton mills of Bombay during the closing period
of the First World War. End of the war and declining profits, however, led to discontinua-
tion of this practice. The Second World War started in 1939 and industrial units, including,
cotton textile, again started making profits, and the practice started once again. Wartime
bonus came to be regarded as payment made to the workers out of the extraordinary profits
earned during the war. Although several employers paid bonus voluntarily, there being no
statutory provision, many disputes on the issue arose and were referred to adjudication. The
M11_SING6013_01_C11.indd 232 6/15/10 3:33:00 PM

adjudication took the view that profits were made possible by the cooperation, both of labour
and capital. Labour, therefore, had a right to share in increased profits. The claim to bonus
was accepted chiefly on grounds of broad principles of justice, equity and good conscience
with a view to keeping labour contented. This position continued until the Bombay High
Court laid down that payment of bonus could be demanded by workers as a right, that is to
say, a payment that should be made by the employer as extra-remuneration for work done by
the employee under a contract, express or implied.
11.4.1 Labour Appellate Tribunal (LAT) Formula

A dispute relating to payment of bonus by the cotton mills of Bombay was decided by the
Industrial Court, Bombay.
In its decision, the LAT laid down the main principles involved in the grant of bonus to
workers. These principles are known as the LAT formula. According to the formula, the fol-
lowing prior charges were to be deducted gross profits of a company:
i) Provisions for depreciation
ii) Reserve for rehabilitation (of machinery and equipment)
iii) Return of 6 per cent on the paid-up capital
iv) Return on the working capital at a rate lower than the return on paid-up capital
The balance, if any, was called “available surplus”, and the workmen were to be given a reason-
able share out of it by way of bonus for the year.
11.4.2 Bonus Commission

The formula laid down by the labour appellate tribunal was followed all over the country by
industrial tribunals in awarding bonus, although demands for its revision continued to be
made from time to time. The main point on which this revision was sought centred on the
provisions for rehabilitation, accepted by the LAT as a prior charge. The Government of India
appointed a Bonus Commission in 1961 to consider all issues of employers and employees
in totality and give its recommendations. The recommendations of the Commission were
accepted by the government with minor changes and promulgated as an Ordinance in 1964.
This Ordinance was the basis of the Payment of Bonus Act, 1965.
11.4.3 Objectives
The object of the Payment of Bonus Act has been articulated comprehensively by the Supreme
Objectives of the Act
Court as follows2:
Impose statutory liabil-
Impose statutory liability upon employer covered by the Act to pay bonus to ity upon employer to
employees pay bonus to employ-
ees
Define the principles of bonus payment Define the principles of
bonus payment
To provide limits for maximum and minimum bonus payable and linking the same to
Provide limits for maxi-
principles of “set-off ” and “set-on”
mum and minimum
Provide machinery for enforcement of the liability of employer bonus payable and
linking the same to
principles of “set-off”
and “set-on”
11.4.4 Applicability Provide machinery for
enforcement of the
The Payment of Bonus Act extends to the whole of India. liability of employer
It is applicable to every factory and to every establishment wherein 20 or more work-
ers are employed on any day during an accounting year.
M11_SING6013_01_C11.indd 233 6/15/10 3:33:00 PM

The appropriate government can extend its provisions to any establishment employ-
ing less than 20 but more than 10 employees.
For the purpose of calculating the number of employees for applicability of the Act,
part-time employees are also included.
Every employee, not drawing more than INR 10,000 per month,3 who has worked for
not less than 30 days in an accounting year shall be eligible for bonus.
Bonus is to be paid within eight months from the expiry of the accounting year.
Once the Act is applicable, it continues to apply even if the number of employees falls
below 20.
The Act is applicable to government companies and corporations owned by the gov-
ernment, which produces goods or renders services in competition with the private
sector.
The Act is not applicable to:
Government employees
Employees of local bodies, universities, public-sector insurance employees and LIC
employees, employees of RBI and public-sector financial institutions, charitable hos-
pitals, social-welfare organizations and defence employees
Any not-for-profit institution
The meaning of “establishment” has not been defined in the Act. However, “establishment”,
under Labour Laws, has wide connotation. It may include any office or a fixed place where
business is carried out.
The Act applies to an establishment in the public sector only if the establishment
in the public sector sells the goods or renders services in competition with an estab-
lishment in the private sector, and the income from such sale or services or both is
not less than 20 per cent of the gross income of the establishment. Basically, the intent
appears to be to make the Act applicable only to institutions established for the pur-
pose of profit.
Establishment in the public sector means an establishment owned, controlled or man-
aged by—(a) a government company as defined in Section 617 of the Companies Act (b) a
corporation in which not less than 40 per cent of its capital is held (whether singly or taken
together) by the government; or the Reserve Bank of India; or a corporation owned by the
government or the Reserve Bank of India.
“Corporation” means any corporate body established by or under any central or state
Act, but does not include a company or a cooperative society.
Where an establishment consists of different departments or undertakings or has
branches, whether situated in the same place or in different places, all such departments or
undertakings or branches shall be treated as parts of the same establishment for the purpose
of computation of bonus under this Act.
11.4.5 Important Terms

The Payment of Bonus Act comprises a few terms that may require some accounting and
taxation knowledge. These are: “available surplus”, “allocable surplus”, “prior charges”, “set-
off ” and “set-on”. Instead of reproducing the definitions from the Act, we have tried to
explain the concept behind these terms. As a manager, you are expected to have a broad
overview of the concepts and a basic understanding of the process of bonus calculations,
applicability or non-applicability of the Act to certain establishments and employees, the
obligations of an employer, etc. You can always seek the help of legal and accounting profes-
sionals, should the need arise.
M11_SING6013_01_C11.indd 234 6/15/10 3:33:00 PM

A CCO UNT ING Y EAR. Different business entities may have different accounting
periods. The Act, therefore, defines the accounting periods with precision mainly because the
bonus calculations are based on the financial results of an entity.
In Relation to a Corporation: The year ending on the day on which the books and accounts
of the corporation are to be closed and balanced.
In Relation to a Company: The period in respect of which any profit-and-loss account of
the company laid before it in the annual general meeting is made up, whether that period is
a year or not.
In Any Other Case: The year commencing on the 1st day of April; or, if the accounts of
an establishment maintained by the employer are closed and balanced on any day other
than the 31st day of March, then, at the option of the employer, the year ending on the
day on which its accounts are closed and balanced. An option, once exercised by the
employer, shall not again be exercised, except with the previous permission in writing
of the prescribed authority and upon such conditions as that authority may think fit.
GROSS PROFIT, PRIOR CHARGES, AVAILABLE SURPLUS, ALLOCABLE

SURPLUS. Simply stated, bonus has to be distributed from the allocable surplus in
the accounts of a company/establishment. The allocable surplus is a percentage of avail-
able surplus (usually 60 per cent). The available surplus is arrived at after deducting
prior charges from the gross profit. A simplified version has been shown in Figure 11.2.
With a simplified process in place, let us now try to understand the terms in greater detail.
Step 1: The starting point would be the financial statements (P&L and balance sheet) at the
end of the accounting year. The first step is to determine the gross profit. Section 4 of the Act
Figure 11.2
P & L statement Flow chart for the
(Section 4) Gross profit to be calculated as per Schedule 1 for payment of bonus.
banking companies and as per Schedule 2 for non banking
Gross profit companies
(Section 6) Specified sums to be deducted from gross profits,

Prior charges
the items to be so deducted are mentioned in this section.
Available surplus (Section 5) Available Surplus = Gross Profits (Sec 4) – Prior

Charges (Sec 6) + Income Tax on the Bonus amount paid in
the previous accounting year
60/67% of available surplus
(Section 2–4) Allocable Surplus = 67% of Available Surplus in

Allocable surplus
case of non banking companies who don’t have any
arrangements for payment of dividends in India; 60% of
Bonus payment in proportion available surplus in all other cases
to earnings and subject to
limits
(Sections 10 & 11) Minimum bonus payable is 8.33% of the
annual wage or salary whether or not there is any Allocable
Surplus in the relevant year. If the Allocable Surplus is in
excess of the minimum bonus to be paid then bonus at a
higher rate than 8.33% is payable subject to a maximum of
20% of the salary or wages.
Set Off (Section 15) Set On (Section 15)

Allocable Surplus < Minimum Allocable Surplus > Maximum
Bonus Payable (i.e. 8.33%) Bonus Payable (i.e. 20%)
M11_SING6013_01_C11.indd 235 6/15/10 3:33:01 PM

gives the method of calculating the gross profit as per Schedules 1 and 2 of the Act. Schedule
1 prescribes the method for banking companies, whereas Schedule 2 provides the method
for other companies.
Step 2: It is the process through which available surplus (Section 5) is arrived at. From the
gross profit calculated through Section 4, certain specified sums are to be deducted as prior
charges. These prior charges are mentioned in Section 6 of the Act; for example, deprecia-
tion as permissible under the Income Tax Act, development rebate or allowance that the
employer is entitled to deduct from his income under the Income Tax Act, any direct tax
liability within the provisions of Section 7 or any other amount specified in Schedule 3.
These would depend upon the category of the employer namely:
Company other than a banking company
Banking company
Corporation
Cooperative Society
Any other not falling in the above categories
Step 3: To this amount (gross profits – prior charges), the following difference is added:
Direct tax on gross profits for the previous accounting year – direct tax on gross profits
in last accounting year – amount of bonus paid or liable to pay during the last account-
ing year.
In effect, this means that the tax paid on the amount of bonus gets added to arrive at
available surplus.
Step 4: Allocable surplus will be an amount equivalent to 60 per cent or 67 per cent of the
available surplus. It would be 67 per cent in case of non-banking companies, which do not
have provisions for payment of dividends out of their profit in India. For all other companies,
it is 60 per cent. For all practical purposes, therefore, 60 per cent of available surplus is to be
reckoned as allocable surplus.
M IN I M UM AND M AXI M UM BO NUS. It is from the allocable surplus that

bonus is to be paid to the employees, proportionate to their wages. A minimum of 8.33 per cent
of the annual salary or wages or INR 100, whichever is higher, is to be paid as bonus. This has
a few noteworthy points:
1. The employee must have worked for a minimum of 30 days in the relevant account-
ing year to be eligible for bonus payment. However, the employee would be consid-
ered to have worked on days he has been laid off, been on leave with wages, absent
due to temporary disablement arising out of and in course of employment or on
maternity leave.
2. Salary/wage of the employee must be INR 10,000 or less.
3. Even though the salary may be more than INR 3,500 for the purpose of bonus calcula-
tion, the maximum salary is to be reckoned as INR 3,500 only. (See Box 11.5.)
4. An employee is disqualified for payment of bonus if s/he has been dismissed from
service for: a) fraud or b) riotous or violent behaviour within premises of establish-
ment or c) theft, misappropriation or sabotage of any property of establishment.
5. Where an employee has not worked for all the working days in an accounting year,
his bonus will be proportionately reduced.
6. Payment of bonus must be made within eight months of the closing of the account-
ing year.
7. Most importantly, even if the establishment does not have any allocable sur-
plus, or suffers losses, minimum bonus is payable. Minimum bonus, thus, has
M11_SING6013_01_C11.indd 236 6/15/10 3:33:03 PM

BOX 11.5 CALCULATING THE MINIMUM BONUS
If the monthly wage of an employee is, say, INR 8,000, then in a year when minimum
bonus is to be paid, he shall be paid only 8.33 per cent of his annual wage calculated at
the rate of INR 3,500 per month.
However, if the wage of another employee is INR 2,200 (a hypothetical situation,
since the minimum wage in majority of cases is more than this) the bonus will be paid at
the rate of 8.33 per cent of INR 2,200 × 12 (actual monthly wage × 12).
been made a statutory right of employees through this legislation. There are a
few exceptions, as in the case of new establishments, which are mentioned in
Section 16.
Where the allocable surplus in an accounting year exceeds the minimum amount to be
paid as bonus, the employer is bound to pay an amount in proportion to the salary or
wage earned by the employee subject to a maximum of 20 per cent of such salary or wage
(Section 11).
SET-ON AND SET-OFF OF ALLOCABLE SURPLUS. Where, for any accounting

Maximum and
year, the allocable surplus exceeds the amount of maximum bonus payable to the employ-
Minimum
ees in the establishment under Section 11, the excess shall, subject to a limit of 20 per cent of
the total salary or wage of the employees employed in the establishment in that accounting Minimum Bonus Payable
in an Accounting Year =
year, be carried forward for being set-on in the succeeding accounting year and so on up
8.33 Per Cent of Annual
to and inclusive of the fourth accounting year to be utilized for the purpose of payment of Wage or Salary
bonus in the manner illustrated in Schedule 4. What this means is that if the allocable sur- Maximum Bonus Payable
plus in a year is more than 20 per cent (maximum limit) of the wages and salaries, then the in an Accounting Year =
amount in excess of 20 per cent shall be carried forward to be utilized in a year when the 20 Per Cent of Annual
Wage or Salary
allocable surplus is either nil or less than the minimum limit (8.33 per cent). The amount
The principle behind
so carried forward, however, cannot be more than 20 per cent of salaries and wages. The fixing a minimum and
20-per-cent figure occurs twice and this, at times, may be confusing on first reading. To maximum limit for pay-
illustrate this, suppose the 20 per cent of salaries and wages in a year is INR 200,000. The ment of bonus is that the
allocable surplus is INR 500,000. This would mean that INR 200,000 would be distributed rate of bonus should not
fluctuate widely from year
for the relevant accounting year (being maximum limit for bonus payment). Out of the
to year.
excess of INR 300,000, only INR 200,000 can be carried forward for being set-on (cap of
20 per cent).
Where, for any accounting year, there is no available surplus, or the allocable surplus
in respect of that year falls short of the amount of minimum bonus payable to the employ-
ees in the establishment under Section 10, and there is no amount or sufficient amount
carried forward and set-on under Sub-section (1), which could be utilized for the purpose
of payment of the minimum bonus, then such minimum amount or the deficiency, as the
case may be, shall be carried forward for being set-off in the succeeding accounting year
and so on up to and inclusive of the fourth accounting year in the manner illustrated in
Schedule 4.
Where in any accounting year, any amount has been carried forward and set-on or set-
off under this section, then, in calculating bonus for the succeeding accounting year, the
amount of set-on or set-off carried forward from the earliest accounting year shall first be
taken into account.
Table 11.1 has been adapted from Schedule 4 of the Act for the purpose of complete
understanding. To understand the table, the following assumptions are to be made:
For an establishment, in any accounting year, the minimum bonus payable is INR
104,167, i.e., 8.33 per cent of the annual wage bill. The maximum limit works out to INR
250,000, i.e., 20 per cent of the wage bill. The allocable surplus (60 or 67 per cent of the avail-
able surplus) has been assumed for each of the 10 years.
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Table 11.1 “Set-on” and “set-off”.
Allocable Amount Set-on or Set-off to Total Set-on or

Surplus Payable as be carried Forward Set-off Carried
Year (INR) Bonus (INR) (INR) Forward (INR) Explanation
1. 104,167 104,167 Nil Nil The allocable surplus

equal to minimum limit
(8.33per cent). No carry
forward
2. 635,000 250,000 Set-on = 250,000 Set-on: 250,000 is the maximum

bonus payable in column
250,000 ( Year 2)
2. 250,000 (i.e., 20
per cent maximum over
the maximum limit of
20 per cent) only out of
the balance 385,000
(635,000−250,000) can
be carried forward to be
set-on
3. 220,000 250,000 Nil Set-on: The allocable surplus

(including is 220,000. To this,
220,000 (Year 2)
30,000 from add 30,000 from the
year 2 carry carry forward amount
forward of of year 2 to make the
250,000) bonus payable at the
maximum of 20 per cent,
i.e., 250,000. The carry
forward amount from
year 2 (i.e., 250,000) is
reduced by 30,000 to
220,000.
4. 3,75,000 250,000 Set-on = 125,000 Set-on: Note that in subsequent

years, the carried-forward
220,000 (Year 2)
amount from an earlier
125,000 (Year 4) year gets set-off first.
5. 140,000 250,000 Nil Set-on: Carry forward amount of
(Including 220,000 from year 2 gets
110,000 (Year 2)
1,10,000 reduced by 110,000 and
out of INR 125,000 (Year 4) balance carried forward
220,000 from from year 2 also remains
year 2) at 110,000 (220,000-
110,000)
6. 310,000 250,000 Set-on = 60,000 Set-on: The carry forward of

110,000 from year 2
Nil (Year 2)
lapses after the fourth
125,000(Year 4) accounting year
60,000 (Year 6)
(Continued)
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7. 100,000 250,000 Nil Set-on: Carried forward amounts

(Includes to the extent of 150,000
35,000 (Year 6)
125,000 from (125,000 from year 4 and
year 4 and 25,000 from year 6) used
25,000 from to arrive at the maximum
year 6) bonus of 250,000
payable.
8. Nil (Due to 104,167 Set-off = 69,167 Set-off: Minimum bonus of 8.33

loss) (104,167 – 35000) per cent (104,167) must
69,167 (Year 8)
be paid. The balance
remaining after adjusting
the carried forward
amount from year 6 is
carried forward to be
set-off in subsequent
accounting years.
9. 10,000 104,167 Set-off = 94,167 Set-off: Minimum bonus to be
(104,167 – 10,000) paid. The deficit carried
69,167 (Year 8)
forward to be set-off in
94,167 (Year 9) subsequent accounting
years.
10. 215,000 104,167 Nil Set-off: Minimum bonus =

104,167. Carried forward
52,501 (Year 9)
of year 8 set-off against
the amount of allocable
surplus remaining after
paying minimum bonus
(215,000⫺104,167 =
1,10,833). From 1,04,833,
the carried forward amount
of year 8, i.e. 69,167 is
set-off, leaving 41,666
(104,833⫺69,167 =
41,666). The remaining
C/F amount from year
9, i.e. 94,167 is now
adjusted, leaving an
amount of 52,501 to
be carried forward to be
set-off in future accounting
years (94,167⫺41,666 =
52,501)
A F EW D EF INIT IO NS AND P R OVI SI O NS. Although most definitions,

terms and provisions have been explained in the text above, a few are once again explained
in terms of the Act:
Employee: Any person (other than an apprentice) employed on a salary or wage not exceed-
ing INR 10,000 per month in any industry to do any skilled or unskilled manual, supervisory,
managerial, administrative, technical or clerical work for hire or reward, whether the terms
of employment be express or implied
Salary or Wage: All remuneration (other than remuneration in respect of overtime work)
capable of being expressed in terms of money, which would, if the terms of employment,
M11_SING6013_01_C11.indd 239 6/15/10 3:33:04 PM

express or implied, were fulfilled, be payable to an employment or of work done in such

employment and includes dearness allowance (that is to say, all cash payments, by whatever
name called, paid to an employee on account of a rise in the cost of living, but does not
include—
i) Any other allowance that the employee is, for the time being, entitled to
ii) The value of any house accommodation or such of light, water, medical attendance
or other amenity or of any service of any concessional supply of food grains or other
articles
iii) Any travelling concession
iv) Any bonus (including incentive, production and attendance bonus)
v) Any contribution paid or payable by the employer to any pension fund or provident
fund or for the benefit of the employees under any law for the time being in force
vi) Any retrenchment compensation or any gratuity or other retirement benefit payable
to the employees or any ex gratia payment made to him
vii) Any commission payable to the employee
Proportionate Reduction in Bonus in Certain Cases: Where an employee has not

worked for all the working days in an accounting year, the minimum bonus of INR 100
or, as the case may be, of INR 60, if such bonus is higher than 8.33 per cent of his salary
or wage for the days he has worked in that accounting year, shall be proportionately
reduced.
Computation of Number of Working Days: For the purposes of Section 13 (proportion-
ate reduction in bonus in certain cases), an employee shall be deemed to have worked in an
establishment in any accounting year also on the days on which:
i) He has been laid off under an agreement or as permitted by standing orders under
the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the
Industrial Disputes Act, 1947 (14 of 1947) or under any other law applicable to the
establishment
ii) He has been on leave with salary or wage
iii) He has been absent due to temporary disablement caused by accident arising out of
and in the course of his employment
iv) The employee has been on maternity leave with salary or wage, during the account-
ing year
Adjustment of Customary or Interim Bonus Against Bonus Payable Under the Act: Where
in any accounting year: (a) an employer has paid any puja bonus or other customary bonus
to an employee; or (b) an employer has paid a part of the bonus payable under this Act to an
employee before the date on which such bonus becomes payable; then, the employer shall be
entitled to deduct the amount of bonus so paid from the amount of bonus payable by him
to the employee under this Act in respect of that accounting year and the employee shall be
entitled to receive only the balance.
Deduction of Certain Amounts from Bonus Payable Under the Act: Where in any
accounting year, an employee is found guilty of misconduct causing financial loss to
the employer, then it shall be lawful for the employer to deduct the amount of loss
from the amount of bonus payable by him to the employee under this Act in respect
of that accounting year only, and the employee shall be entitled to receive the balance,
if any.
Separate Establishment: If profit and loss accounts are prepared and maintained in respect
of any such department or undertaking or branch, then such department or undertaking or
branch is treated as a separate establishment.
M11_SING6013_01_C11.indd 240 6/15/10 3:33:04 PM

Disqualification and Deduction of Bonus: On dismissal of an employee for fraud, or riot-

ous or violent behaviour while in the premises of the establishment, or theft, misappropria-
tion or sabotage of any property of the establishment, or misconduct of causing financial loss
to the employer to the extent that bonus can be deducted for that year.
The situation described in the chapter-opening vignette is not an isolated case but almost
a normal occurrence in the industrial relations scenario. The point of contention is no longer
the provisions of the Act, but the difficult area of arriving at a mutually accepted available
surplus. In the absence of detailed computations being made available, the contention from
one side is the lack of transparency in the calculation of available surplus (and deduction
of prior charges), whereas the other side maintains that the employees take a short-term
view and do not have a “buy-in” in the future challenges facing the company. A lack of rigid
criteria and, at places, of transparency and credibility of calculations, the employees rely
on previous reported profits and bonus paid to demand bonus in the current year. For the
employees, it is a legitimate expectation that if the reported profits show a growth, there
should be a corresponding growth in the rate of bonus payment. Another contentious issue
is that larger number of the workforce is now outside the purview of the Act on account of
a higher salary/wage. There is a pressure from these set of “employees” for some sort of ex
gratia payment, causing potential for industrial strife. In fact, in many cases (especially in the
PSUs), these employees wait for the announcement of statutory bonus before raising the issue
for collective bargaining on ex gratia and, if need be, industrial action.
SUMMARY
The Payment of Wages Act, 1936 the “living wage”, “minimum wages” and “fair wage” besides
setting out guidelines for wage fixation.
The Payment of Wages Act, 1936 has been enacted with the
intention of ensuring timely payment of wages to the workers Article 39 of the Constitution states that the State shall direct
and for the payment of wages without unauthorized deductions. its policy towards securing:
The salary in factories/establishments employing less than that the citizen, men and women equally shall have the
1,000 workers is required to be paid by the 7th of every right to an adequate livelihood and
month, and in other cases, by the 10th day of every month.
that there is equal pay for equal work for both men and women
A worker, who either has not been paid wages in time or
The Act prescribes the minimum rates of wages payable to
from whose wages unauthorized deductions have been
employees for different scheduled employment for different
made, can file a “claim” either directly or through a trade
classes of work and for adults, adolescents, children and
union or through an inspector under this Act, before the
apprentices depending upon different localities.
authority appointed under the Payment of Wages Act.
An employer is required to pay to every employee stipulated
The power for hearing and deciding claims under this Act
in the schedule of employment, at a rate not less than
has been vested at present with the Presiding Officer of a
minimum rates of wages as fixed by notification by not
Labour Court.
making deductions other than prescribed.
The Minimum Wages Act, 1948
The appropriate government is empowered to fix minimum
The need for a country to have minimum wage-fixing rates of wages and to review at such intervals not exceeding
machinery was stressed by the International Labour five years the minimum rates so fixed, and revise if required.
Organization long back in 1928. Twenty years later, our
The government can also fix minimum wages for (a) time work
country passed the Minimum Wages Act, 1948.
(b) piece work at piece rate (c) piece work for the purpose of
The reason given by the government for passing the Act securing to such employees on a time-work basis (d) overtime
was that workers’ organizations in the country were poorly work done by employees for piece work or time-rate workers.
developed and, consequently, their bargaining power also
For fixing the minimum wages, the appropriate government
was very poor.
may follow one of the following two procedures:
A tripartite committee, The Committee on Fair Wage, was
Committee Procedure
set up in 1948 to provide guidelines for wage structures in
the country. Its recommendations set out the key concepts of Notification Procedure
M11_SING6013_01_C11.indd 241 6/15/10 3:33:04 PM

The Payment of Bonus Act, 1965 But the Act also puts a ceiling on the bonus and the
maximum bonus payable under the Act is equivalent to
The Payment of Bonus Act, 1965 gives to the employees a
about two-and-a-half months’ salary or wage (20 per cent of
statutory right to a share in the profits of his employer.
annual earnings).
Prior to the enactment of the Act, some employees used to
Employees drawing salary or wage exceeding INR. 10,000
get bonus, but that was so if their employers were pleased to
per month are not entitled to get any bonus under the Act
pay the same.
(w.e.f. 1 April 2006).
The Act enables the employees to get a minimum bonus
equivalent to one month’s salary or wages (8.33 per cent of annual
earnings), whether the employer makes any profit or not.
KEY TERMS
maximum bonus 237 set-off 233 wage period 226
minimum bonus 237 set-on 233 wages 223
minimum wage 223
REVIEW QUESTIONS
1 What is the object of the Payment of Wages Act, 1936? 12 Is the task of the government over once it fixes minimum
rates of wages payable to employees employed in a scheduled
2 To which establishments is the Act applicable?
employment?
3 Are all wages covered or protected by the Act?
13 What is the obligation of the employer in respect of payment
4 Are overtime wages to be taken into account for deciding the of wages under the Minimum Wages Act, 1948?
applicability of the Act?
14 What is the objective of the Payment of Bonus Act, 1965?
5 Can any employer fix a period longer than one month for
15 To which establishments is the Act applicable? Are the
paying wages to a person employed by him?
establishments in public sector covered by the Act?
6 What are the requirements of the Act in respect of the time
16 Who are entitled to be paid bonus under The Payment of
of payment of wages?
Bonus Act, 1965?
7 What are the requirements of the Act in respect of the
17 What is to be included in and excluded from a salary or wage
method of payment of wages?
for the purpose of calculating bonus?
8 What is the provision of the Act regarding deductions from
18 What is the amount of minimum bonus payable by the
the wages payable to an employed person?
employer to his employees every year?
9 What is the objective of the Minimum Wages Act, 1948?
19 What is the meaning of available surplus and allocable
10 Which employments are intended to be benefited by fixation surplus and what is the connection between allocable surplus
of minimum rates of wages? and bonus?
11 What is the procedure the government has to follow for 20 What is the principle of set-on and set-off of allocable
fixing and revising minimum wages? surplus?

1 Are the provisions of Section 9(2) of the Payment of Wages the Industrial Disputes Act providing for penalty for illegal
Act permitting deduction in wages for the participation strikes? Do an Internet search for relevant case laws on the
in illegal strike affected by the provisions of Section 26 of matter and discuss it in the class.
M11_SING6013_01_C11.indd 242 6/15/10 3:33:04 PM

D E B AT E
1 The Payment of Wages Act is of limited use, i.e., only with 3 More than focusing on minimum wages, the government
regard to organized labour. It is, therefore, unsuccessful in needs to introduce a nation-wide, legally binding,
establishing standards and norms with regard to payment of employment-guarantee programme, in terms of the right to
wages across the country. work under the Directive Principles of State Policy.
2 The object of the Minimum Wages Act is not fully served as 4 Should contract workers be brought within the purview of
the wage levels are mostly decided on the basis of collective the Bonus Act, 1965? Discuss points in favour of and against
bargaining. of this amendment from the employer’s perspective.
Periodicity of Payments 1 Discuss the grounds on which Girdhar can claim his dues
with specific reference to the Act.
Girdhar is in a dilemma. When he was appointed at
the construction site of Ketak Building and Construction 2 What could the arguments be from the employer’s side?
Company, he was told that his deployment and location
Eligibility for Bonus
would change with the projects the company undertakes,
and payment would be dependent on the completion of the A group of 31 workers were employed during maintenance
allotted job at the site, not on a daily or a monthly basis. shut-down period of one month inside the factory premises.
Girdhar was desperate for a job and agreed to these terms Once Unit 1 maintenance activity was completed, the same
in writing. He has been working for over eight years now set of workers was deployed in another unit for a period of 40
and the payment continues to be erratic with long gaps. In days. The practice of engaging the same set of 31 workers for
the initial years, when he did not have a family to look after, unskilled work with regard to maintenance activities carried
the aperiodicity of payment was not a matter of concern to on for over 8 months. After a gap of 10 days, 28 of the 31
him. Over the last few years, he has been repeatedly taking workers were deployed at the head office for stock-taking audit
up the matter with the supervisor, who dismissed his request and cleaning activities, which extended for 95 days. When the
saying that this is the way the company makes payment. regular workers were given bonus, these workers also raised a
“Take it or leave” was a warning note that still rings out in demand for bonus. The General Manager (HR) informed the
Girdhar’s ears. workers that they are not entitled to bonus as they have not
completed the minimum eligibility period for the grant of bonus.
Girdhar’s plight has worsened since the time he has been
asked to travel to local shops to make small purchases The workers approached the local union leader who took up
or snacks for the supervisors deployed on the site. the case with the employer. His contention was that the spirit
Many a time, he has to travel by local transport. The of the Bonus Act makes the employees eligible for bonus
reimbursement of the expenses is also accumulated in the and it was not for them to decide their place of deployment.
register, and the payment is made along with his salary. Just to avoid bonus payment, the employer has been
One day, Girdhar refused to go to the central market of frequently deploying these workers on different assignments.
the site area, which resulted in an altercation with the
1 Are they entitled to “bonus”? Why? Prepare a detailed report
supervisor. An exchange of abuses led to his dismissal.
quoting relevant provisions of the Act, and also relevant case
Girdhar is now seeking help of some union leaders
laws on the subject.
belonging to another construction company to collect his
past dues. When the appointment letter was shown to the 2 Would they be entitled to a differential bonus for the
union officials, they informed him of a provision of notice work period inside the factory premises and the period of
period of one month stipulated in the letter. work activity in the head office?
NOTES
1 http://www.tn.gov.in/gorders/labour/labemp 3 Introduced retrospectively from 1 April 2006 through an
Ordinance in October, 2007
2 Jalan Trading Company Private Limited vs Mills Mazdoor
Union, AIR (19) SC 9611
M11_SING6013_01_C11.indd 243 6/15/10 3:33:04 PM

chapter twelve
12.1 Industrial Conflict After reading this chapter, you will be able to:
12.2 The Big Picture • Get a comprehensive overview of the
12.3 Industrial Dispute Under the ID Act institutional framework for the maintenance
12.4 Industrial Dispute: Concept of industrial relations—preventive and
12.5 Forms of Industrial Action reactive
12.6 Types of Disputes • Understand the main reasons for industrial
12.7 Severity of Effects disputes
12.8 Causes of Industrial Dispute • See the trend of industrial relations in India
12.9 Measures to Improve Industrial in recent times
Relations • Relate the IR concepts to real-life situations
12.10 Industrial Disputes: A Historical • Appreciate the changing paradigms of
Perspective industrial conflict from the employee-
12.11 Machinery to Deal with Industrial relations-management perspective
Disputes
12.12 The Industrial Disputes Act, 1947
The Loco Operators
The loco operators of the traffic department in a steel plant are classified as a “critical category” of workmen. Their job
involves the movement of raw materials and intermediate products from one shop to another, quickly and without spillage.
Any delay on their part may lead to large production and other losses. To operate a loco, a minimum crew size was agreed
to, through a tripartite agreement with the plant union. The agreement was signed six years back, but today, none of the loco
drivers insisted on the minimum crew size. In case of need, they would multi-task. One day, O. P. Garg, the manager in the
traffic department, got a report that one of the loco operators had refused to operate his loco, since the shunting operator
was absent, thus reducing the minimum crew requirement. This led to a huge loss, since the hot metal that was to be trans-
ported from melting shop to the rolling mills was left at the shipping bay to cool off. There were reports of loco operators
insisting on minimum crew strength throughout the day. The operators insisted that it was unsafe for them to operate with-
out minimum strength and also that the absence of minimum crew increased the job burden on them. Garg recommended
strict disciplinary action against the erring operators. As a result, “charge sheets” were served on all the loco operators.
Immediately, the plant control reported that the entire traffic operations in the plant had come to a standstill. Workers had
refused to work and had assembled in the local union office. Next day, the refusal to work had spread to other shops too
and the union had served a strike notice for the entire plant. Demonstrations and gate meetings were held throughout the
plant, demanding action against managers who had indulged in unfair treatment of employees, and with it, a host of other
issues like safety, incentives, officiating allowance, etc. Garg reported to the general manager that all these pressure tactics
by the loco operators was a manifestation of the distribution of overtime within the traffic department. This was an opera-
tional issue that was being discussed for the past few months, and by insisting on minimum crew strength, the operators
and the union had just created a bargaining issue, since this had ceased to be of any significance over the past three to four
years. Whatever the objective facts, the steel plant was now facing a serious industrial relations “situation”. Garg was of the
opinion that the management should retaliate, as negotiating on this issue will send a wrong signal. Suspending the erring
loco operators and declaring a “lockout” in the traffic department were some of the “options” he suggested to the GM.
M12_SING6013_01_C12.indd 244 6/15/10 5:11:07 PM

Industrial Relations:
Institutional Framework for the
Prevention and Settlement of
Industrial Disputes
Industrial disputes issues are some of the most contentious and potentially divisive issues in many parts of the
world. It is important to establish the power of prediction through a comprehensive understanding of the issues
of industrial relations, particularly those covering the theoretical aspects of industrial conflict and its manage-
ment in organizations, Industrial disputes are essentially symptoms of industrial unrest and reflect a lack of
cooperative spirit and harmonious relations in industry. Elaborate preventive and reactive measures are put
in place to minimize the debilitating social-economic-political fallouts of industrial disputes. Disputes and
conflicts, to an extent, are unavoidable. The effort, therefore, is to prevent it from becoming dysfunctional, i.e.,
when the outcome has the potential to damage the parties to the conflict.
Situations like these are not very uncommon in an industrial set-up. Working “as per rules”, rais-
ing the stakes, collective refusal to work, putting pressure on the other side and resolving conflict
through the use of power are what happen at the workplace very often. The loco-operator case high-
lights the facets that an industrial conflict may have. This chapter will explore the issues underlying
such conflicts and disputes at the workplace.
12.1 Industrial Conflict

Conflict, in some form or the other, at a workplace is inevitable. We generally get to hear of
only those kinds of conflicts at workplaces that make headlines. In Chapters 12, 13 and 14,
we shall be taking a look at the perspectives, causes, types and measures for resolving these
conflicts.
12.1.1 The IR Perspective

Industrial conflict can occur at various levels—between two employees, between two groups of
employees, between members of a group, between employees and employers as a group or individ-
ually. It has different implications for individual behaviour and work-group behaviour. Industrial
conflict is generally attributed to inter-group conflict; between management and workers (unions)
or between two worker groups or even between two groups of employers. Whenever there are
differences between the goals of separate groups or even several individuals in a group, conflict
occurs.
It needs to be understood that all conflicts are not dysfunctional. It also needs to be appreci-
ated that conflict is inherent in the industrial structure. Industrial peace and harmony are, however,
the objectives of every business organization. A conflict of interests between the various groups is
M12_SING6013_01_C12.indd 245 6/15/10 5:11:09 PM

essentially the progeny of a capitalist economic organization. In a situation where wants of

both parties are unlimited, and resources limited, a kind of “distributive bargaining” would
lead to a “win-lose” situation, which would lead to a conflict. This, if not prevented or resolved
in time, is likely to result in industrial action, which may result in production and other
losses. The conflict occurs due to different orientations and perceptions of interests by the
three main players—the owners, the workers and the union. The pursuit of divergent objec-
tives by each causes friction severe enough to lead to industrial actions like strikes/lockouts.
At the organizational level, industrial conflict can occur due to the interactions: (i)
within individual players in the organization—between union leaders and managers and (ii)
between the groups represented by the management and union leaders
These groups, organized and unorganized, manifest their conflict in various forms—
some may be overt in the form of protests and strikes, while others may be in the form of
undercurrent of resistances. The ultimate manifestation of industrial conflict is a strike on the
part of workers, and lockout on the part of managers/employer.
The origin of conflict is perceptual differences based on each party’s area or focus of
interest. However, Japanese firms adopting espirit-de-corps, whereby workers resort to dem-
onstrations in support of their demands after working hours lest it affect production, can
be considered an exception. Truly, such a situation can be achieved only if the management
brings about a culture of trust and empowerment that creates a strong sense of belongingness
and organizational citizenship.
12.1.2 The ER Perspective

Organizational performance is based upon the cooperation between labour and capital.
However, cooperation is provoked from the pursuit of self-interests as well. Thus, owners
of capital offer employment, wages, welfare amenities to labour, who in turn offer their
services, the quantity and quality of which is determined by the motivation and morale
of the workforce. A fair degree of give-and-take would be the foundation on which a base
for cooperation can be developed. How this mutual trust and sense of belongingness are
developed within the organization would determine the state of employee relations in the
industry.
The common thread between the IR and the ER perspective is how relationships are
built within the organization, how production is carried out and how costs and profits are
shared between labour and capital. The employee relations approach to conflict resolu-
tion is to focus on systemic, structural and processual aspects, creating an environment of
cooperation, so as to promote the organizational-citizenship behaviour as mentioned in the
paragraph above.
12.2 The Big Picture

We have come to that part of human relations, where relationships are sought to be man-
aged between different groups at a macro-level or at the aggregate level. Conflict is a reality,
and this has been realized by all the parties of industrial relations. It is axiomatic that the
slate of industrial relations can never be clean. Indeed, quite a few scholars and manage-
ment practitioners believe that the path to growth is only through effectively resolving
conflicts. Nevertheless, it is vital that both preventive and other measures be there in place
to ensure that such conflicts do not get dysfunctional and, in turn, cause losses to indi-
viduals, society, polity and economy. We, in India, also have an elaborate framework in
place, both statutory and non-statutory, to prevent and resolve conflicts that may become
dysfunctional. The big picture is given in Figure 12.1. As students and practitioners, it is
advisable to completely understand the overall scheme of things in the total industrial
relations framework. We shall, thereafter, take each of the components for a detailed treat-
ment. In this manner, one will be able to understand the relationship of each component
to the over all framework.
M12_SING6013_01_C12.indd 246 6/15/10 5:11:10 PM

Industrial Relations: Institutional Framework 247
Figure 12.1
The IR Framework
P The “big picture” of
ILO, ILC, SCL, NLC, R industrial relationship
Collaboration, Policy, IR Climate
Code of Discipline E machinery.
V
Standing Orders, E
N
Grievance Redressal,
Systems & Processes T
Works Committee, JMC, I
Bi-partite Committees, V
Collective Bargaining E
The ID Act, 1947
Conciliation Officer, Board of S
Conciliation Conciliation, Court of Enquiry E
T
T
L
Arbitration Voluntary E
M
E
Adjudication Labour Court, Labour Tribunal, N
National Tribunal T
The top half of Fig. 12.1 (above the box labelled “The ID Act, 1947”), together, are what
we can term as preventive measures, systems and processes for the maintenance of industrial
peace or a productive industrial relations climate. The bottom half comprise measures that
take effect when a conflict or dispute has arisen. These are mostly statutory measures and
covered under the Industrial Disputes Act, 1947.
In this chapter and Chapter 13, we shall discuss, first of all, the nature, concept and causes
of industrial disputes. Thereafter, we shall discuss the provisions of the Industrial Disputes
Act, 1947. In Chapter 14, we shall discuss the preventive measures, systems and processes.
Keep the “big picture” (Figure 12.1) in mind when we are discussing each of the components
,and where it is placed in the larger scheme of things.
12.3 Industrial Dispute Under the ID Act

There are many perspectives and definitions of industrial dispute. For the purpose of clarity,
simplicity and relevance, we would consider the definition as provided in the ID Act, 1947.
According to Section 2(k) of the Industrial Disputes Act, 1947, “industrial dispute” is
defined as, “Any disputes or differences between employers and employers, or employers
and workmen, or workmen and workmen which is connected with the employment or non-
employment or the terms of employment or with the conditions of labour, of any person”. It
is surprising that the definition includes differences between employers and employers also
as an industrial dispute. Can you think of an example?
12.4 Industrial Dispute: Concept

Seen from the perspective of the definition stated above, various terms can be associated
with “industrial dispute”—“labour dispute” or even “trade dispute”, which basically are terms
used to identify differences between the employers and the workers. A dispute, to become an
industrial dispute, should satisfy the following:
i) There must be a dispute or a difference (a) between employers and employees;
(b) between employers and workmen and (c) between workmen and workmen.
ii) It should be connected to employment or non-employment or terms of employment
or with the conditions of labour (not managers or supervisors).
M12_SING6013_01_C12.indd 247 6/15/10 5:11:10 PM

iii) A relationship between the employer and the workman should exist and it should be
the result of the contract and the workman actually employed.
Thus, industrial dispute is related to an existing industry and must entail a real dispute. The
persons or parties to the dispute are connected through an employment relationship, and
have a direct or substantial interest. The requirement at (ii) eliminates issues between super-
visors/managers and the top management. This marks the differentiation of the definition of
“industrial disputes” viewed from an industrial relations perspective as it takes cognizance to
the definition prescribed in the ID Act and the employee relations perspective, which would
embody all disputes relating to the employee–employer relationship irrespective of the level
of the employee concerned. It should also be noted that the subject-matter of an industrial
dispute must be specific, i.e., that which affects the relationship of employers and workers.
This establishes the form and type of dispute, and the resolution of the same becomes easier
to operationalize.
12.5 Forms of Industrial Action

Industrial action is a term that has not been defined in any of the industrial laws but it means
action that may follow if disputes of conflicts cannot be resolved through negotiations.
“Strikes” and “lockouts” are forms of industrial action. In general, a strike is a form of protest
by the workers or their representatives while a lockout is an industrial action taken by the
employer. A strike is stoppage of work initiated or supported by a trade union when a group
of employees act together as a last resort to bring pressure on an employer, to resolve a griev-
ance or constrain him to accept such terms and conditions of service as the employees want
to enjoy. If, however, an employer closes down his factory or place where his workers are
employed, or if he refuses to continue in his employ a person or persons, because he wants to
force them to agree to his terms and conditions of service during the pendency of a dispute,
the resulting situation is a lockout.
In both “strike” and “lockout”, there is an element of demand and coercion. These are the
ultimate weapons in the hands of the two parties.
In the ID Act, 1947, a strike has been defined as:
“. . . a cessation of work by a body of persons employed in an industry acting in combina-
tion; or a concerted refusal of any number of persons who are or have been so employed to
continue to work or to accept employment; or a refusal under a common understanding of
any number of such persons to continue to work or to accept employment”. By defining and
making provisions to go on strike under certain circumstances, the ID Act, 1947 recognizes
the right to go on a strike (and to declare a “lockout”).
For trade unions, a strike is the most powerful weapon for forcing the management to
accept their demands. Various kinds of strikes (a form of industrial action arising out of non-
settlement of disputes or non-resolution of conflicts) are described below.
12.5.1 Different Forms of Strike

Strikes can be classified in several ways, although it has not been done in any of the Acts.
One such classification divides strikes into two categories—primary and secondary
(see Table 12.1).
P RIMAR Y ST R I KE S. Primary strikes include the following.

i) Economic Strike: Most of the strikes of workers are for more facilities and increase
in wage levels. In economic strike, the employees demand increase in wages, travel-
ling allowance, house-rent allowance, dearness allowance and other facilities such
as increase in privilege leave and casual leave. Pilots of an airline may go on a strike
on the issue of parity in pay with expatriate pilots of the same airline.
M12_SING6013_01_C12.indd 248 6/15/10 5:11:10 PM

Table 12.1
Types of Industrial Action Types of Disputes
Types of industrial actions
Primary Strikes and disputes.
Economic
General
Stay-In Rights
Slow Down Interest
Secondary Strikes Grievance
Sympathetic Recognition
Boycott
Picketing
Gherao
Bandh
Employers
Lockout
Bandh
ii) General Strike: It means a strike by members of all or most of the unions in a
region or an industry. It may be a strike of all the workers in a particular region
of industry to force demands common to all the workers. It may also be an exten-
sion of the sympathetic strike to express generalized protest by the workers. The
Federation of Insurance Employees may strike work across the insurance industry
to mark their protest against policies of the government towards opening up the
sector for FDI.
iii) Stay-in Strike: In this case, workers do not make themselves absent from their place
of work when they are on strike. They keep control over production facilities, but
they do not work. Such a strike is also known as “pen-down” or “tool-down” strike.
The employees would show up for work, mark their attendance, but will not start
the work.
iv) Slow-down Strike: This is a variation on the stay-in strike. The rate of output is
reduced to a level much below the normal output rate. Employees remain on their
jobs under this type of strike. They do not stop work, but restrict the rate of output in
an organized manner. They adopt go-slow tactics to put pressure on the employers.
v) Work to Rule: Employees are not formally on strike and continue to work strictly
as per the rules prescribed. Strict adherence to rules in some businesses can have a
retarding effect on productivity and the quality of service. It is a form of slow-down
movement.
Please refer to Box 12.1 to understand what a “go slow” in real life is. Often, there
is an absence of a clear demarcation between strategies such as “go-slow” and “work
to rule”. You may see that the union has described the situation as work according
to rules. They have explained it away by saying that workers who were not taking
“scheduled” breaks are now being asked to take those breaks, which is strictly as
per “rules”.
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BOX 12.1 GO-SLOW AT NEW MANGALORE PORT

Port workers at New Mangalore have adopted a go-slow attitude in work over the issue of pay-
ment of money to them. While the Dock Workers’ Union at the port claims that the port workers
are working as per the rule, the Association of New Mangalore Port Stevedores has said that
these workers are seeking the payment of “speed money” in cash rather than in cheque. The
association urged the authorities concerned to bring normalcy in the operations at the port.
In a letter to the port users, the President of the Association of New Mangalore Port
Stevedores said port labourers are being paid “speed money” apart from their wages
and official incentives. These labourers are drawing a huge salary and other benefits and
an equal amount of unofficial “speed money”. These labourers are adopting a go-slow
attitude since Friday, seeking “speed money” in cash rather than in cheque. It is difficult to
pay such amounts in cash, the letter said.
When contacted, the General Secretary of Dock Workers’ Union said: “There is no
strike. We are working as per rule.” He said that earlier, some labourers were working
without taking the scheduled breaks as they were getting more incentives for working that
extra time. Now, they are taking those breaks.
However, he agreed with the fact that this go-slow attitude has brought down the
output. The productivity might have come down by 100–150 tonnes per shift. The work-
to-rule has not affected the operation, he said.
Source: Bureau, “Go Slow on New Mangalore Port on Payment,” The Hindu Business Line,
6 May 2008.
SEC O NDAR Y ST R I KE S. Secondary Strikes include the following.

i) Sympathetic Strike: When workers of one unit or industry go on strike in sympa-
thy with workers of another unit or industry who are already on strike, it is called a
sympathetic strike.
ii) Boycott: The workers may decide to boycott the company in two ways—first, by not
using its products; and second, by making an appeal to the public in general. In the
former case, the boycott is known as primary and in the latter secondary.
iii) Picketing: When workers are dissuaded from work by stationing certain men at the
factory gates, such a step is known as picketing. If picketing does not involve any
violence, it is perfectly legal.
iv) Gherao: Gherao in Hindi means to surround. The workers may gherao the mem-
bers of the management by blocking their exits and forcing them to stay inside their
cabins. The main object of gherao is to inflict physical and mental duress on the
person being gheraoed. This started as a political pressure tactics in West Bengal in
the 1960s, and, thereafter, has been used by trade unions in the industry as a means
of putting pressure on the management.
v) Bandh: In Hindi, it means “closed”, and it is a form of protest used by political activ-
ists in countries like India and Nepal. During a bandh, a large chunk of a commu-
nity declares a general strike, usually lasting one day. Often bandh means that the
community or political party declaring a bandh expect the general public to stay in
their homes and strike work. Also, all the shopkeepers are expected to keep their
shops closed and the transport operators like buses and cabs are supposed to stay
off the road and not carry any passengers. All this is expected to be voluntary, but
in many instances, people are terrorized and coerced into participating in a bandh.
There have been instances of large metropolitan cities coming to a standstill. Bandhs
are powerful means for civil disobedience. Because of the huge impact that a bandh
has on the local community, it is much feared as a tool of protest. A bandh is not the
M12_SING6013_01_C12.indd 250 6/15/10 5:11:10 PM

same as a “hartal”, which simply means a strike—during a bandh, any business activ-
ity (and sometimes even traffic) in the area affected will be forcibly prevented by the
strikers. In recent years, the courts have taken a very serious view towards bandh,
which is considered a tool that causes misery to the general public.
MANAG EM ENT ACT IO NS TO CO UNT E R ST R I KE S. The management

uses its own methods to counter the workers. Some of the industrial actions in the manage-
ment armoury are:
1. Employers’ Association: The employers may form their unions to collectively
oppose the working class and put pressure on the trade unions.
2. Lockout: An employer may close down the place of employment temporarily. Such
a step is technically known as lockout. It is the reverse of a strike and is a very pow-
erful weapon in the hands of an employer to pressurize the workers to return to the
place of work. According to the Industrial Disputes Act, 1947, “lockout means the
closing of a place of employment or the suspension of work, or the refusal by an
employer to continue to employ any number of persons employed by him (please
refer to Box 12.2). Here, the management has tried to put counter-pressure on the
union and the workmen against alleged “illegal strike” by the union. Notice that, just
like strike, lockout also has an element of “demand”.
3. Termination of Service: The employers may resort to suspension or disciplinary
action leading to termination of services of those workers who are on strike. The list
of employees so suspended/dismissed may be circulated to other employers so as to
act as a deterrent and also restrict their chances of getting employment with other
employers.
Procedures for avoiding strikes, lockouts and other forms of coercive action, in connection
with industrial disputes between trade unions and employers are generally laid down in the
form of a clause or clauses in an agreement between the two. At the same time, it is also laid
down that there shall be no stoppage of work and no coercive act on the part of either party,
to a dispute till the procedures outlined in the agreement have been gone through and the
two parties have been unable to come to a compromise or reach a settlement. As we will see
later, there are elaborate provisions and guidelines, both statutory and non-statutory, which
are meant to prevent conflicts and disputes from getting dysfunctional. Yet, they do! Box 12.3
provides a glimpse of the extent to which they do! And please notice that all the 430 disputes in
the box resulted in some form of industrial action (temporary work stoppages due to a strike
or a lockout). Many actions fail to make it to the labour statistics due to a variety of reasons
(for example, you may, as an ER manager, be reluctant to book production loss to man/wom-
an-made disputes. It may have a bearing on your annual appraisal). Thus, industrial-disputes
reporting is anything but simple.
BOX 12.2 LOCKOUT DECLARED BY APOLLO TYRES
On 6 December 2008, recession-hit Tyre major, Apollo Tyres, declared a “lockout” in its
Kalamassery unit in Kerala. The unit employs 1,100 persons. According to the manage-
ment, this unit was a high-cost centre in terms of cost of production. To overcome this
challenge, management had been trying its best to improve the utilization of equipments
and machinery in sections such as curing and extrusion. Cooperation of the union had
been sought to overcome the challenge. But the unions, according to the management,
had taken a negative and non-cooperative attitude. There was reluctance to even give
agreed output in terms of long-term settlement signed earlier. The immediate provocation
for the lockout, according to management, was the “illegal strike” resorted to by the union
after months of non-cooperative and confrontationist attitude.
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BOX 12.3 INDUSTRIAL DISPUTES AND INDUSTRIAL ACTION: FY 2006

Industrial Disputes: 430 industrial disputes were reported involving 1.81 million work-
ers and resulting in total loss of 20.32 million man-days, INR.1730.07 (in 173 cases
reported) were lost by workers as wages and production loss of INR 3813.82 million was
reported (in 99 cases). Out of these disputes, 80 (18.60 per cent) were in central sphere
and 350 (81.40 per cent) in the state sphere. The private sector accounted for 342 (79.53
per cent) industrial disputes and the public sector only 88 (20.47 per cent) disputes were
reported. There has been a declining trend in the number of disputes, workers involved
and man-days lost over the previous year 2005. The declining trend indicates compara-
tively better working condition and cordial industrial relations during the year 2006.
Among the states, West Bengal accounted for the highest number of disputes, i.e.,
173 (40.23 per cent). The manufacturing sector among the industry groups reported
259 (60.23 per cent) of the disputes and “Wages and Allowances” was the cause which
accounted for 18.37 per cent of disputes reported during the year 2006.
Strikes and Lockouts: Out of 430 industrial disputes reported during 2006, 243
(56.51 per cent) were strikes and 187 (43.49 per cent) were lockouts. The private sec-
tor accounted for 63.79 per cent (155) of the strikes. Amongst the states, Tamil Nadu
accounted for the highest number of strikes, i.e., 50 (20.58 per cent) and West Bengal
reported the highest number of lockouts, i.e., 144 (77.01 per cent). There has been an
increase in the number of strikes and decline in the number of lockouts during 2006 as
compared to the year 2005.
Others: The number of work-stoppages due to reasons other than industrial disputes
during the year 2006 was 182. Out of the total, 178 were lockouts and 4 were strikes.
Here, too, there has been a declining trend in the number of disputes, workers involved
and man-days lost, which indicates better management of the economy and availability of
raw materials, power and sufficient demand for the products, etc. during the year.
Adapted from “Statistics on Industrial Disputes, Closures, Retrenchment and Lay-Offs in

India During the Year 2006”, Labour Bureau, Government of India (http://labourbureau.
nic.in/reports.htm).
12.6 Types of Disputes

Industrial disputes may be raised on any of the following issues:
i) Fairness of the Standing Orders
ii) Interpretation of Standing Orders and “settlements” and “rules”
iii) Retrenchment of workers following the closing down of a factory, lays-offs, discharge
or dismissal, reinstatement of dismissed employees and compensation for them
iv) Coverage of benefits to particular employees, dependants, non-payment of personal
allowance to seasonal employees; the demand of employees for medical relief for
their parents
v) Wage, fixation of wages and minimum rates, modes of payment and the right of an
employee to choose one of the awards when two awards on wages have been given
vi) Lockout and claim for damages by an employer because employees resorted to an
illegal strike
vii) Payment of bonus, gratuity, provident fund, pension and travelling allowance
viii) Disputes between rival unions
ix) Disputes between employers and employees
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12.6.1 The Classification of Disputes

It is sometimes convenient to put the myriad of dispute under certain categories. It will help
in providing some structure to the study of disputes and will automatically throw light on
the genesis of disputes. The Industrial Disputes Act, 1947 does not provide for any such clas-
sification, nor do any of the employment-related statutes in India. Academics and practising
managers have attempted to classify disputes in different categories. One such categorization
classifies disputes into:
DISP UT ES O F RIGHT S. These relate to the application or interpretation of an

existing agreement or contract of employment. This kind of dispute, if unresolved through
negotiations, is very amenable to resolution through arbitration or adjudication.
DISP UT ES O F INT EREST. These relate to claims by employees or proposals by a

management about the terms and conditions of employment. These are mostly disputes that
can be resolved through discussions and negotiations, give and take. However, in the event
of a dispute not getting resolved through negotiation, these too may be left for resolution
through arbitration/adjudication.
Another common scheme of classification is based on the terms of employment. These are:
i) Interest Disputes: Arising out of deadlocks in negotiations for a collective agreement
ii) Grievance Disputes: Arising from day-to-day workers’ grievance or complaints
iii) Disputes Relating to Discipline: Arising from acts of interference with the exercise
of right to organize, or acts, also termed as “unfair labour practices”
iv) Recognition Disputes: Disputes over the right of a trade union to represent a par-
ticular class or category of workers for purposes of collective bargaining
12.7 Severity of Effects

Manifestations of industrial unrest or conflict cause stoppage of work and/or disruption of
production. Continued and prolonged industrial unrest has serious consequences for the
employees, employers and also for the economy at large.
From the point of view of the employer, an industrial dispute resulting in stoppage of work
means a stoppage of production at the expense of fixed costs, which will yield no returns. It
may lead to a dip in sales turnover, leading to a fall in profits, and loss of prestige and credibility
in business. In some cases, it may also result in destruction of property, personal injury and
physical intimidation or inconvenience. An establishment prone to industrial unrest would
also be a barrier in attracting the best available manpower. Investment climate suffers and, thus,
modernization, expansion and technological upgradation become that much more difficult.
For the employee, an industrial dispute entails loss of income, as invariably, a strike or any
form of protest leads to the deduction in wages. In India, the ability of trade unions to provide for
the needs of striking workers is very limited. The threat of loss of employment in case of failure
to settle the dispute advantageously, or the threat of reprisal action by employers also exists.
Prolonged stoppages of work have also an adverse effect on the national productivity
and national income. In some cases, it may also result in political action disrupting amicable
social relations.
12.8 Causes of Industrial Dispute

The disputes between the management and the workers may arise on account of the follow-
ing factors:
1. Economic Cause: These causes may be classified as:
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Demand for increase in wages on account of increase in all-India consumer

price index for industrial workers
Demand for better social-security benefits
Demand for higher bonus
Demand for certain allowances such as:
䊊 House-rent allowance
䊊 Medical allowance
䊊 Night-shift allowance
䊊 Conveyance allowance
Demand for paid holidays
Mode or terms and conditions of employment
Reduction of working hours
Better working conditions
Violation of a registered agreement or settlement or award
Demarcation or role clarity about a job or function
2. Political Causes: As in India, various political parties control trade unions in India.
In many cases, their leadership vests in the hands of persons who are more inter-
ested in achieving their political interests rather than the interests of the workers.
3. Personnel Causes: Sometimes, industrial disputes arise because of personnel prob-
lems like dismissal, retrenchment, layoff, transfer, promotion, etc.
4. lndiscipline: Industrial disputes also take place because of indiscipline and violence
on the part of the workforce. The managements, to curb indiscipline and violence,
resort to disciplinary action. In some cases, they may resort to lockouts as well.
5. Managements: Generally, they are not willing to talk over any dispute with their
employees or their representatives. It may also be on account of the management’s
unwillingness to recognize a particular trade union. Even when the representative
trade unions have been recognized by employers, officials are not delegated to nego-
tiate with the workers or representatives.
6. Absence of Grievance Redress Machinery or Procedure: This results in the accu-
mulation of grievances creating a climate of unrest among workers.
7. Government Machinery: The machinery provided by the government for the reso-
lution of industrial conflicts may be inadequate and slow.
8. Miscellaneous Causes: Some of the other causes of industrial disputes can be:
Workers’ resistance to rationalization
Automation, the introduction of new machinery
Change of place
Often, unemployment results from the implementation of rationalization schemes
and the installation of new machines because of which fewer persons would be
employed. Capital-intensive, rather than labour-intensive, industries are set up,
which further aggravates the problem of unemployment and creates dissatisfaction
among the workers.
Non-recognition of trade union
Misinformation campaigns and rumours
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Nandigram in East Midnapur district of West Bengal is one of the seven SEZs sanctioned in
West Bengal. The proposed SEZ (now scrapped) was to develop a mega-chemical hub. The
choice of this mega-chemical hub in the Haldia region was the result of a long exercise
undertaken by the Government of India where this venue was chosen along with four other
sites in the country. With the existing petroleum refinery of the IOC, the petrochemical plant
at Haldia in the joint sector and the huge facility of Mitsubishi chemicals, this decision to
have the mega-chemical hub located here made business sense. The Haldia petrochemi-
cals have led to 700 units in the downstream providing an employment to over 1 lakh
people. The Government of West Bengal had signed a Memorandum of Understanding
with the Indian Oil Corporation to be an anchor investor for the project, while the Salim
group would have been the promoter for building the infrastructure.
The Chief Minister of West Bengal had stated no progress on the project would take
place until consultations were held with elected representatives in the panchayat and the
people of the area. As there had been no survey done and consultations held, the question
of land acquisition did not arise before these processes took place.
The demand was that land acquisition would only take place if a credible plan
for improving the quality of life and livelihood could be put forth. This was the overall
approach of the left.
To add to the unrest, a number of other political forces had come together at
Nandigram. There were cases of legitimate protests and also cases of planned violence
disrupting the peace at Nandigram. The compelling reason for any such project in the
state will be premised on the question of employment generation and improving the lot
of the poor and disadvantaged sections. The Left Front had anticipated the need for such
a project on the eve of the last elections. Therefore, the Left Front election manifesto had
clearly stated: “Industrial parks have been decided to be set up in the task of modernizing
the traditional labour-intensive industries, and to make them competitive. Parks will be set
up for foundry, jute, rubber, garments, textile, iron and steel, chemicals polymer, light engi-
neering, and food” and “a minimum of four big industrial taluka and special economic
zones will be set up in the state”.
The industrial conflict here was with regard to the nature of the industry and the manner
in which it took place. The difference in perception was with regard to the private corporate’s
way of viewing industries and that of the Left. Will this have an effect on workplace IR?
Working conditions and working methods

Lack of proper communication
Behaviour of supervisors
Inter-trade-union rivalry, etc.
9. Non-Industrial factors: There could be many causes that are rooted in historical,
political and socio-economic factors and the attitudes of workers and their employ-
ers. Some of the causes of dispute could be—no improvement in the standard of liv-
ing of employees who put forward demands for higher wages, or persons displaced
on account of an industrial activity on land acquired from them. Refer to Box 12.4.
12.9 Measures to Improve Industrial Relations

These are a few measures required for a healthy industrial relationship—
Progressive Management Outlook: There should be progressive outlook of the management
of each industrial enterprise in relation to—
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Obligations and responsibilities to the owners of the business, the employees, the
consumers and the nation
The rights of workers and proactive approach towards addressing issues of concern,
or an employee relations approach
Strong and Stable Union: The union must be strong and stable to represent the major-
ity of workers and negotiate with the management about the terms and conditions of
service.
An Atmosphere of Mutual Trust: Through a systemic approach at developing an atmosphere
of mutual cooperation, confidence and respect have to be created. While the management
adopts a progressive outlook and recognizes the rights of workers, the labour unions are to
take pains and persuade their members to work for the common objectives of the organiza-
tion. Both the management and the unions must repose faith in collective bargaining and
other peaceful methods of settling disputes.
Collaboration: The employers must recognize the right of collective bargaining of the trade
unions (not only in letter but in spirit). In any organization, there must be a great emphasis
on mutual accommodation rather than conflict or uncompromising competitive attitude.
Competitive attitude is likely to foster union militancy. The approach must be of mutual “give
and take” for creating “win-win” situations.
Fair Implementation of Agreements: One must sincerely adhere to the terms of settlements
reached with the trade unions in letter and spirit.
Workers’ Participation in Management: The participation of workers in the management
of the industrial unit should be encouraged by making effective use of workers’ commit-
tees, joint consultation and other methods. This will improve communication between man-
agers and workers, which may, in the long run, increase productivity and lead to greater
eeffectiveness.
Measures to Improve IR
SSound HRM Systems, Policies: As far as practicable, the following measures regarding
Progressive manage- HHRM-related policies would have a bearing on healthy IR:
ment outlook
Strong and stable Consultation in formulation of policies
union
Clarity in statement of objectives, procedures, rules and regulation
An atmosphere of
mutual trust Uniformity in implementation of the policies
Collaboration
Fair implementation of
The Government as an Honest Broker: The government should play an active role for pro-
agreements moting
m industrial peace. It should facilitate collective bargaining through measures aimed at
Workers’ participation creating
c “bargaining agents” in each industrial unit. It should intervene to settle disputes if
in management the
t management and the workers are unable to settle their disputes. This will ensure indus-
Sound personnel poli- trial
t harmony.
cies
The government’s role
12.10 Industrial Disputes: A Historical
Perspective
An overall assessment of industrial peace or unrest can be made through a series of hard data
over a period of time. The Labour Bureau, Government of India publishes annual data on the
following:
i) Number of work stoppages and lockouts
ii) Man-hours lost due to industrial disputes
iii) Production loss due to industrial disputes
In a broader context, strikes or lockouts or collective work stoppages are taken as indicators of
good or bad industrial relation. Taking an ER or employee relations perspective would include
the number of grievances not settled attrition rate of the company, career growth opportuni-
ties, etc. Comparisons of the number of work stoppages or man-days lost would be meaningful
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Industrial disputes resulting in work stoppages. Table 12.2

1961 1971 1981 1991 2003 2004 2005
No. of Disputes 1357 2752 2589 1810 552 477 456
No. of Workers Involved (‘000) 511860 138937 1588004 1342022 1816 2072 2914
Man-days Lost (‘000) 4918755 16545636 36583564 26428090 30256 23866 29665
Wages Lost 66.14 108.16 116.12
( Rs. in Crores) (191) (160) (146)
Value of Production Loss 418.49 355.60 345.07

(Rs. In Crores)
(149) (131) (121)
Source: Various issues of the Handbook of Labour Statistics and the annual report of the Ministry of Labour.
only if compared against the workable population of the country. Further, statistics published
by the labour ministry take into consideration only the organized sector. A large part of indus-
trial activity in India is also in the unorganized sector. Table 12.2 shows the trends in industrial
disputes over the years. The table includes end-of-decade figures for earlier years.
It is interesting to note that even though the number of work stoppages has reduced, the
the impact in terms of number of workers involved and wage loss have has grown over the
years. The intensity as well as frequency, both, account for the dynamics of the industrial rela-
tions environment. Table 12.3 traces the nature and underlying causes of industrial disputes
in the organized sector in India over a period of time, since the early part of the twentieth
century.
An analysis of labour statistics indicates:
An upward trend in disputes begins after 1965 induced by inflationary pressure
The decade of the 1970s influenced by inter-union rivalry and politically provoked
disputes
Marked reduction in the 1980s as labour found it difficult to protest with a change
in the balance of power, more so with the advent of the New Economic Policy
Labour-intensive industries like plantations, coal, textiles, railways and banking
have accounted for 20–30 per cent of work stoppages in India
Work stoppages were fewer in the public sector than the private sector
For an understanding and appreciation of the industrial relations scenario in the current phase
of economic growth in the country, a detailed analysis of the industrial conflicts in the current
decade is more important. The socio-economic environment today is markedly different. The
Pocketbook of Labour Statistics, published by the Labour Bureau, Government of India, is a
very useful source for analysing trends. The analysis in the following paragraphs is based on
these annual publications.
The number of industrial disputes in the country has shown a slow but steady fall over
the past 10 years. In 1998, the total number of disputes was 1,097, which fell by more than
half to 440 in 2006. This significant decline is attributed to the serious attempts made by
industries to improve relations with their workers on a one-to-one basis. This is the paradigm
shift from an industrial relations approach to an employee relations approach. However, a
deeper look at the data reveals that the number of man-days (i.e., the industrial unit of pro-
duction equal to the work one person can produce in a day) lost due to disputes has not
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Table 12.3 Causes of industrial disputes.
Period Characteristics Reasons Outcome
Prior to No signs of industrial unrest

1920
1920–1930 Frequent strikes involving textile Wages affected by trade Appointment of Industrial
workers of Bombay, railway depression—wage and bonus Disputes Enquiry Committee in
workers and jute workers of issues, growing cohesion among 1921 to study the Bombay strike
Bengal workers, no effective organization
to address demands of workers
1930–1940 Decline in number of strikes but Wage and bonus issues

intensity stronger—Kanpur textile
industry strike most eventful
1940–1950 Pre–World War II period strikes Higher wages, leave and Two Ordinances:
affected by price rise but post- conditions of work
1. Defence of India rules
War period notorious years in
prohibiting strikes and
the history of industrial unrest
lockouts and compel
affecting cotton, woollen and silk
employers and workers to
mills. In 1949, intense industrial
observe certain terms and
unrest in railways and post and
conditions
telegraph
2. 1942—prohibiting a person
from going on strike without
giving 15 days’ notice
3. ID Act, 1948
1950–1960 General strike in Bombay textile Rise in cost of living and Code of Discipline evolved in
mills started on 14 August 1950 rising expectations of workers 1958
continuing till 17 October 1950. post-Independence, growing
Cotton textile mills affected the communist influence among
most workers
1960–1970 Reduction in industrial disputes Adjudication machinery Industrial Truce Resolution of

functioning well 1962
1970–1980 Emergency period—declining Outburst of excesses suffered

trend in number of disputes by workers during emergency
but reversed during post- period and rejection of routine
Emergency—worst-hit states West grievances
Bengal and Maharashtra
1980–1990 Relative peace Economic pressure
1990s Aggressive employer, clamour Liberalization Amendments proposed in labour

for labour-market flexibility and laws but not enacted, stalemate
labour-law reforms
come down as significantly. The country, on an average, lost 25.4 million man-days of work
annually between 1998 and 2006. The most recent statistics relating to man-days lost and the
number of disputes is given in Table 12.4.
The decline in the number of industrial disputes has been consistent since 1998, as
shown in Table 12.4 and Fig. 12.2. Following this, a decline of 2.3 per cent has been registered
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Industrial disputes (in numbers). Table 12.4
Year Number of Disputes Workers involved (‘000) Man days lost (in millions)
Strikes Lockouts Total Strikes Lockouts Total Strikes Lockouts Total
2001 372 302 674 −12.6 489 199 688 −51.5 5.56 18.2 23.77 −17.4
2002 295 284 579 −14.1 900 179 1079 56.8 9.66 16.92 26.58 11.8
2003 255 297 552 −4.7 1011 805 1816 68.3 3.2 27.04 30.25 13.8
2004 239 230 469 −15.0 1742 141 1883 3.7 3.9 10.4 14.3 −52.7
2005* 243 215 458 −2.3 2111 184 2295 21.9 7.3 16.0 23.3 62.9
Note: Monthly data are provisional. *Figures for 2005 are not strictly comparable with those for 2004 in view of the
incomplete coverage of the former. Figures in italics are percentage change over the previous year. Source: Indian Labour
Journal, Labour Bureau, various issues and Ministry of Labour and Employment, 2004–2005
in 2005 over the previous year. Although there has been a decline in the number of strikes,
the country still witnessed some major strikes between 2004 and 2006, like those in Honda,
Escorts, Apollo, and S Kumar’s factories and in SBI.
Interestingly, the number of workers involved and man-days lost has risen substantially
in 2005, which can be attributed to greater worker participation in disputes and prolonged
nature of industrial disputes, as compared to those in 2004. Nevertheless, a declining number
of industrial disputes exhibit relative improvement in labour relations as compared to the yes-
ter years, which could be conducive to faster industrial growth. There have been 222 disputes
in which 51,127 workers have been affected and 10,496,911 man-days have been lost due to
the reasons other than industrial disputes during 2005. These reasons may include shortage
of raw material, shortage of power, financial stringency, wages-and-allowances indiscipline
or violence, and non-implementation of labour enactments, etc.
In February 2006, there have been 17 industrial disputes due to which more than
1,67,000 man-days were lost. This was slightly lesser than approximately 1,73,000 man-days
lost in February 2005 due to a larger number of workers involved. Interestingly, the number
of industrial disputes has shown sudden increase in a month’s time; it increased to 17 in
February 2006 as against 4 in January 2006. Similarly, the number of workers involved and
the man-days lost due to these disputes has also shown substantial increase during such a
short span of time.
Figure 12.2
Number of strikes/lockouts
1000 The number of strikes and

800 lockouts from 1995 to
2005.
600
400
200
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Strikes Lockouts
M12_SING6013_01_C12.indd 259 6/21/10 4:10:32 PM

12.10.1 Sector-wise Trends

The numbers of strikes reported during 2005 were 227 (56 in public and 171 in private sec-
tor) and 229 lockouts (1 in public and 228 in private sector). The numbers (456) of disputes
reported during 2005 were less by 4.4 per cent as compared to the year 2004 (477). The per-
centage share of public sector in the number of disputes, workers involved and man-days lost
was 12.5, 70.0 and 7.8 per cent respectively of the all-India total numbers of disputes, workers
involved and man-days lost. Similarly, private sector constituted 87.5, 30.0 and 92.2 per cent
respectively.
12.10.2 Spatial Trends

On an all-India basis, the state sphere had the highest percentage of disputes and man-days
lost (i.e. 89.9 per cent and 92.6 per cent), whereas, central sphere constituted less number of
disputes and man-days lost (i.e., 10.1 per cent and 7.4 per cent). The large number of workers
involved in strikes and lockouts, i.e., 69.9 per cent, were in the central sphere as compared to
the state sphere. In the Central Sphere, the Banks accounted for the highest time loss (1.49
million man-days) followed by Industry group Coal Mines with 0.50 million man-days.
12.10.3 A State-wise Comparison

West Bengal accounted for the highest time loss during 2005 (19.22 million man-days) fol-
lowed by Kerala (3.62 million man-days), Rajasthan (1.93 million man-days), Maharashtra
(1.43 million man-days), Andhra Pradesh (1.01 million man-days) and Tamil Nadu (0.66
million man-days). In the central sphere, Andhra Pradesh had the highest number of dis-
putes (13) and workers involved were 0.93 millions and the number of man-days lost (0.94
million man-days) were the highest in Maharashtra. There was only one lockout reported in
the central sphere, involving 64,721 workers and resulting, thereby, 0.19 million man-days.
Out of 229 lockouts, as many as 223 or 97.38 per cent were pure lockouts (i.e., lockouts
originating and terminating as lockouts). These lockouts caused a time loss of 18.26 million
man-days or 96.78 per cent of the total time loss caused by all lockouts in the country. The
state of West Bengal accounted for the highest number of pure lockouts, i.e., 181 resulting in
a time loss of 15.86 million man-days or 86.85 per cent of the total time loss caused by pure
lockouts during the year 2005.
12.10.4 Industry-wise Trends

Amongst the industry group, the manufacturing sector accounted for the highest number of
disputes (290 or 63.60 per cent of the total disputes) with a time loss of 19.33 million man-
days or 65.15 per cent of the total time loss. Within this industry division, “manufacturing of
textiles” accounted for the highest time loss (13.54 million man-days or 70.03 per cent of the
total time loss) in the manufacturing division during the year 2005.
The industries facing intense agitation from the workers have been textiles, engi-
neering, chemicals and food products, where indiscipline and violence, wage rates and
personnel issues have been the primary causes of strikes and lockouts. In terms of indus-
try-wise permanent closures and workers affected, the manufacturing sector has recorded
the highest number along with other industries like “other community, social and per-
sonal services”. Similarly, in terms of the number of units affecting retrenchment and
workers affected thereby, the only industry, which has registered positive numbers, is
“health and social”.
It is apparent that both, the employers and employees, hold their respective strong
grounds in order to justify their stand in industrial matters. This calls for an urgent need to
rationalize labour laws in terms of regulating working hours and wages of contract labour
and establishing machinery for a dispute resolution. Some states like Andhra Pradesh,
Madhya Pradesh and Maharashtra have proposed to seek relaxation in provisions of the
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central laws through state enactments. Even though labour reform in India remains a con-
tentious issue, a significant change in India’s industrial sector after 2002 was witnessed in a
dramatic 50 per cent fall in instances of strikes and lockouts.
12.10.5 Cause-wise Trends

As regards the causes of industrial disputes, they can be broadly classified into two catego-
ries: economic and non-economic causes. The economic causes will include issues relating to
compensation like wages, bonus, allowances, and conditions for work, working hours, leave
and holidays without pay, unjust layoffs and retrenchments. The non-economic factors will
include victimization of workers, ill-treatment by staff members, sympathetic strikes, politi-
cal factors, indiscipline, etc.
Wages and Allowances: Since the cost of living index is increasing, workers generally
bargain for higher wages to meet the rising cost of living index and to increase their
standards of living. In 2002, 21.4 per cent of disputes were caused by the demand for
higher wages and allowances. This percentage was 20.4 per cent during 2003 and dur-
ing 2004 increased up to 26.2 per cent. In 2005, wages and allowances accounted for
21.8 per cent of the disputes.
Personnel and Retrenchment: The personnel and retrenchment have also been an
important factor that accounted for disputes. During the year 2002, disputes caused
by personnel were 14.1 per cent, while those caused by retrenchment and layoffs were
2.2 per cent and 0.4 per cent respectively. In 2003, a similar trend could be seen,
wherein 11.2 per cent of the disputes were caused by personnel, while 2.4 per cent and
0.6 per cent of the disputes were caused by retrenchment and layoffs. In 2005, only 9.6
per cent of the disputes were caused by personnel, and only 0.4 per cent was caused
by retrenchment.
Indiscipline and Violence: The number of disputes caused by indiscipline has shown
an increasing trend. In 2002, 29.9 per cent of the disputes were caused because of
indiscipline, which rose up to 36.9 per cent in 2003. Similarly, in 2004 and 2005, 40.4
per cent and 41.6 per cent of disputes were caused due to indiscipline, respectively.
During the year 2003, indiscipline accounted for the highest percentage (36.9 per
cent) of the total time loss of all disputes, followed by cause-groups wage and allow-
ance and personnel with 20.4 per cent and11.2 per cent respectively. A similar trend
was observed in 2004, where indiscipline accounted for 40.4 per cent of the disputes.
Bonus: Bonus has always been an important factor in industrial disputes; 6.7 per cent
of the disputes were because of bonus in 2002 and 2003 as compared to 3.5 per cent
and 3.6 per cent in 2004 and 2005 respectively.
Leave and Working Hours: Leaves and working hours have not been very important
causes of industrial disputes. During 2002, 0.5 per cent of the disputes were because of
leave and hours of work, while this percentage increased to 1 per cent in 2003. During
2004, only 0.4 per cent of the disputes were because of leaves and working hours.
Miscellaneous: The miscellaneous factors include inter/intra-union rivalry, charter
of demands, workload issues, Standing orders/rules/service, conditions/safety mea-
sures, non-implementation of agreements and awards, etc.
Table 12.5 gives cause-wise break-up (based on the classification adopted by the Ministry
of Labour since 1992) of the number of industrial disputes during the period 2002–2005. In
terms of time lost on account of industrial disputes, “Wages and Allowances” and “Bonus”
accounted for 31.35 per cent of the total time loss due to industrial disputes. Amongst the
non-monetary causes, indiscipline accounted for the highest time loss, i.e., 47.84 per cent fol-
lowed by personnel, i.e., 1.87 per cent of the total time loss during the year 2005. The single
most important cause “indiscipline” was responsible for 72.93 per cent (167) lockouts to the
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Table 12.5
Cause Group 2002 2003 2004 2005
A cause-wise analysis
of the number of labour Wages & allowances 21.3 20.4 26.2 21.8
disputes.
Personnel 14.1 11.2 13.2 9.6
Retrenchment 2.2 2.4 0.2 0.4
Lay off 0.4 0.6 – 0.2
Indiscipline 29.9 36.9 40.4 41.6
Violence 0.9 1 0.9 0.4
Leave and Hours of work/shift working 0.5 1 0.4 –
Bonus 6.7 6.7 3.5 3.6
Inter/Intra-union rivalry 0.4 0.6 0.4 0.4
Non-implementation of agreements 3.1 1 1.1 0.9
Charter of demands 10.5 8.8 5.7 7.1
Workload 0.5 0.4 0.7 1.1
Standing orders, service rules, safety measures 1.8 1 2.4 0.2
Source: Compiled from Pocket Book of Labour Statistics, 2006
total number of lockouts, which alone accounted for 74.28 per cent of the total time loss
due to lockouts during the year 2005. Three all-India strikes took place on 22 March 2005,
31 March 2005 and 29 September 2005 in nationalised banks, Life Insurance Corporation
of India and in other various industries due to the causes of “Wages and Allowances” and
“Charter of Demands” in which 1.83 million workers were involved and accounted for a time
loss of 1.83 million man-days during the year 2005. During the year 2005, 239 disputes were
reported, which were caused by reasons other than industrial disputes. Out of these, 235
(98.33 per cent) cases were of lockouts and 4 (1.67 per cent) cases of strikes, which accounted
for 99.44 per cent and 0.56 per cent of time loss respectively.
12.11 Machinery to Deal with Industrial

Disputes
These days not only the employers and workers, but also the government and the public at
large are equally concerned about disputes, since conflicts, if not resolved in time, take the
form of strikes or lockouts resulting in the loss of profit, wages, production and supply of
goods. There are various ways to cope with industrial conflicts, which have been discussed
in the following section.
12.11.1 Statutory and Non-statutory Measures

In India, the various measures of conflict resolution can be broadly categorized into statutory
measures, non-statutory measures and government-sponsored guidelines. Statutory mea-
sures relate to the various types of machinery set up by the government under the Industrial
Disputes Act, 1947 (like Labour Courts and Industrial and National Tribunals) for specific
conflicts which the government refers to the respective authorities. Moreover, the forma-
tion of Works Committees is also statutorily provided for, to see that the conflict is resolved
in time. Several non-statutory measures like the code of discipline, workers’ participation
M12_SING6013_01_C12.indd 262 6/15/10 5:11:14 PM

in management and collective bargaining, which are voluntary in nature, are supported
by the government, and they help in resolving the conflict. These non-statutory measures
encourage a resolution through negotiation between the two parties and, thus, by their very
nature, speed up the process and cut short the long procedures. Also, intervention by a third
party can be considerably minimized or done away with altogether. The government labour
departments both at the central and the states have a considerable role to play in maintaining
industrial harmony. We shall examine the various methods in some detail.
12.12 The Industrial Disputes Act, 1947

The diverse and conflicting interests of the workmen and employers, the growing labour
consciousness and ever-expanding complex industrial spectra entail frequent friction of
the opposite interests resulting in strikes and lockouts, paralysing the industrial world. This
necessitates amicable settlements to put an end to the dispute already in existence or to pre-
vent an apprehended dispute. The Industrial Disputes Act, 1947 was an outcome of this need
to create a preventive as well as settlement machinery for minimizing industrial unrest.
The Industrial Disputes Act, 1947 is a special legislation, which applies to workmen
drawing wages not exceeding a specified amount per month and governs the service condi-
tions of such persons. This Act deals with the prevention and the settlement of conflicts in
pursuance of industrial peace and harmony.
The Act provides for a special machinery of conciliation officers, work committees,
courts of inquiry, Labour Courts, Industrial Tribunals and National Tribunals defining their
powers, functions and duties and also the procedure to be followed by them.
12.12.1 Objectives
The Industrial Disputes Act, 1947 is formulated to make provisions for the investigation
and the settlement of industrial disputes and for certain other purposes. It is an Act that
aims to ensure specific justice both to the employers and workmen and advance the prog-
ress of industry by bringing about harmony and cordial relationships between the parties.
Specifically, the object of the Act is to:
i) Promote measures for securing and preserving amity and good relations between
employer and employees to minimize the differences, and to get the dispute settled
through adjudicatory authorities
ii) Provide suitable machinery for the investigation and the settlement of industrial
disputes between employers and employees, between employers and workmen, or
between workmen and workmen with a right of representation by a registered trade
union or by an association of employers
iii) Prevent illegal strikes and lockouts
iv) Provide relief to workmen in matters of lay-offs, retrenchment, wrongful dismissals
and victimization
v) Give the workmen the right of collective bargaining and promote conciliation
vi) In short, ameliorate the conditions of workmen in an industry.
12.12.2 Definitions
It is important to have a clear understanding of how the following terms are defined in the Act.
Appropriate Government: In relation to any industrial dispute concerning any industry car-
ried on by or under the authority of the central government, or by a railway company or
concerning any such controlled industry as may be specified in this behalf by the central
government or in relation to an industrial dispute specifically mentioned in the Act
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Controlled Industry: Any industry the control of which by the union has been declared by
any central Act to be expedient in the public interest
Industry: Any business, trade, undertaking, manufacturing or calling of employers and
includes any calling, service, employment, handicraft, or industrial occupation or a voca-
tion of workmen. This definition has since been amended but not implemented. The amend-
ment has come about because of a series of interpretations by the Supreme Court over the
years. In effect, the position today is that, save for the sovereign functions of the state, all
other organizations/enterprise would fall within the meaning of industry unless the govern-
ment specifically mentions otherwise. However, due to political and other implications, the
amended definition has not been put into effect yet.
Industrial Establishment or Undertaking: An establishment or undertaking in which any
industry is carried on. There may be certain establishments comprising more than one unit.
Maybe, there is “industry” being carried out in one unit but not in other units. So, if the
unit is “severable” from the others, it would be a separate industrial establishment. Provided
that where several activities are carried on in an establishment or undertaking and only one
or some of such activities is or are an industry or industries, then,-if any unit of such estab-
lishment or undertaking carrying on any activity, being an industry, is severable from the
other unit or units of such establishment or undertaking, such unit shall be deemed to be a
separate industrial establishment or undertaking; if the predominant activity or each of the
predominant activities carried on in such establishment or undertaking or any unit thereof is
an industry and the other activity or each of the other activities carried on in such establish-
ment or undertaking or unit thereof is not severable from and is, for the purpose of carrying
on, or aiding the carrying on of such predominant activity or activities, the entire establish-
ment or undertaking or, as the case may be, unit thereof shall be deemed to be an industrial
establishment or undertaking.
Lay-off: The failure, refusal or inability of an employer, on account of shortage of coal,
power or raw materials or the accumulation of stocks or the break-down of machinery
or natural calamity or for any other connected reason, to give employment to a workman
whose name is borne on the muster rolls of his industrial establishment and who has not
been retrenched
Lockout: The temporary closing of a place of employment, or the suspension of work, or the
refusal by an employer to continue to employ any number of persons employed by him
Retrenchment: The termination by an employer of the service of a workman for any reason
whatsoever, other than as a punishment inflicted by way of disciplinary action. It does not
include—voluntary retirement of the workman; or retirement of the workman on reach-
ing the age of superannuation if the contract of employment between the employer and the
workman concerned contains a stipulation in that behalf; or termination of the service of the
workman as a result of the non-renewal of the contract of employment between the employer
and the workman concerned on its expiry or of such contract being terminated under a
stipulation on that behalf contained therein; or termination of the service of a workman on
the ground of continued ill health
Strike: A cessation of work by a body of persons employed in any industry acting in combi-
nation or a concerted refusal, or a refusal, under a common understanding of any number of
persons who are or have been so employed to continue to work or to accept employment
Trade Union: A trade union registered under the Trade Unions Act, 1926 (16 of 1926)
Tribunal: An Industrial Tribunal constituted under Section 7A and includes an Industrial
Tribunal constituted before the 10 March 1957, under this Act.
Unfair Labour Practice: Any of the practices specified in Schedule 5
Wages: All remuneration capable of being expressed in terms of money, which would, if
the terms of employment, expressed or implied, were fulfilled, be payable to a workman in
respect of his employment or of work done in such employment, and includes such allow-
ances (including dearness allowance) as the workman is for the time being entitled to; the
value of any house accommodation, or of supply of light, water, medical attendance or other
amenity or of any service or of any concessional supply of food grains or other articles; any
travelling concession; any commission payable on the promotion of sales or business or both;
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but does not include any bonus; any contribution paid or payable by the employer to any
pension fund or provident fund or for the benefit of the workman under any law for the time
being in force; any gratuity payable on the termination of his service
Workman: Any person, including an apprentice employed in any industry to do any
manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or
reward, whether the terms of employment be expressed or implied, and for the purposes of
any proceeding under this Act in relation to an industrial dispute, includes any such person
who has been dismissed, discharged or retrenched in connection with, or as a consequence
of, that dispute; or whose dismissal, discharge or retrenchment has led to that dispute; but
does not include any such person in the armed forces, police, managerial, supervisory or
administrative capacity and those drawing wages above INR 1,600/ p.m.
12.12.3 The Prohibition of Strike and Lockout

The Act prohibits strikes and lockouts subject to the following terms.
1. No person employed in a public-utility service shall go on strike in breach of contract:
Without giving to the employer notice of strike, as hereinafter provided, within
six weeks before striking; or
Within 14 days of giving such notice; or
Before the expiry of the date of strike specified in any such notice as aforesaid; or
During the pendency of any conciliation proceedings before a conciliation offi-
cer and seven days after the conclusion of such proceedings
2. No employer carrying on any public-utility service shall lockout any of his
workmen:
Without giving them notice of lockout as hereinafter provided, within six weeks
before locking out; or
Within 14 days of giving such notice; or
Before the expiry of the date of lockout specified in any such notice as afore-
said; or
During the pendency of any conciliation proceedings before a conciliation offi-
cer and seven days after the conclusion of such proceedings
3. The notice of lockout or strike under this section shall not be necessary where there is
already in existence a strike or, as the case may be, lockout in the public-utility service,
but the employer shall send intimation of such lockout or strike on the day on which it
is declared, to such authority as may be specified by the appropriate government either
generally or for a particular area or for a particular class of public-utility services.
4. The notice of strike referred to in Subsection (1) shall be given by such number of
persons to such person or persons and in such manner as may be prescribed.
5. The notice of lockout referred to in Subsection (2) shall be given in such manner as
may be prescribed.
6. If on any day, an employer receives from any person employed by him any such
notices as are referred to in Subsection (1) or gives to any person employed by him
any such notices as are referred to in Subsection (2), he shall, within five days thereof,
report to the appropriate government or to such authority as that government may
prescribe, the number of such notices received or given on that day.
7. No workman who is employed in any industrial establishment shall go on strike in
breach of contracts and no employer of any such workman shall declare a lock out:
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during the pendency of conciliation proceedings before a Board and seven days
after the conclusion of such proceedings;
during the pendency of proceedings before (a Labour Court, Tribunal
or National Tribunal) and two months, after the conclusion of such
proceedings);
during the pendency of arbitration proceedings before an arbitrator and two
months after the conclusion of such proceedings, where a notification has been
issued under Subsection 3A (of Section 10A); or
during any period in which a settlement or award is in operation, in respect of
any of the matters covered by the settlement or award
12.12.4 Illegal Strikes and Lockouts

1. A strike or lockout shall be illegal if:
i) It is commenced or declared in contravention of Section 22 or Section 23; or
ii) It is continued in contravention of an order made under Subsection (3) of
Section 10 [or Subsection (4A) of Section 10A.]
2. Where a strike or lockout in pursuance of an industrial dispute has already com-
menced and is in existence at the time of the reference of the dispute to a Board (an
arbitrator, a Labour Court, Tribunal or National Tribunal), the continuance of such
strike or lockout shall not be deemed to be illegal, provided that such strike or lock-
out was not at its commencement in contravention of the provisions of this Act or
the continuance thereof was not prohibited under Subsection (3) of Section 10 [or
Subsection (4A) of Section 10A].
3. A lockout declared in consequence of an illegal strike or a strike declared in conse-
quence of an illegal lockout shall not be deemed to be illegal.
12.12.5 Lay-off, Retrenchment and Closure

Lay-off and retrenchment are one of the most controversial propositions of the Industrial
Disputes Act. Apprehending the termination of employment to be one of the most important
reasons for dispute, the ID Act has tried to lay down the circumstances and procedures for
lay-off, retrenchment and closure of undertaking. Before going into the procedures relating
to these, let us see what these terms mean.
L AY- O F F. Lay-offs have been defined under Clause 2(KKK) of the ID Act. It means
the failure, refusal or the inability of an employer to give employment to a workman whose
name is present on the muster rolls of the industrial establishment and who has not been
retrenched. The “failure, refusal or inability” can be for arbitrary reasons but must be specifi-
cally attributed to any of the following:
Shortage of coal /power/raw materials
Accumulation of stocks
Breakdown of machinery
Natural calamity
Any other “connected” reason
Therefore, a workman who has not been retrenched can be laid-off, provided the above-
described conditions are met.
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RET RENCHEM ENT. Retrenchment has been defined in Section 2 (OO) of the Act.
Retrenchment means termination of service by an employer, of a workman, for any reason
whatsoever other than:
as punishment inflicted by way of disciplinary action;
retirement on reaching the age of superannuation if such a stipulation exists in the
contract of employment;
voluntary retirement;
non-renewal of contract; and
continued ill health.
In effect, this means that termination for any reason except the above shall construe to mean
“retrenchment”, in which case, it is necessary for the employer to follow the procedure for
retrenchment, as laid down in the Act. If the proper procedure is not followed, the termina-
tion will be deemed illegal.
CLO SURE . Closure means the permanent closing down of a business. It has been
defined in Clause 2 (CC) of the Act.
CHAP T ER V B. Till 1976, the provisions for lay-off, retrenchment and closure were
identical for all industrial establishments. However, through an amendment in 1976, Chapter VB
was added. Its provisions were different from the earlier provisions and covered industrial
establishments that were not of a seasonal nature and employed, on average, during the last
12-month period, 300 or more workmen. This was further amended in 1982 to make these
provisions applicable to establishments with 100 or more workmen.
THE PROVISIONS FOR LAY-OFF AND RETRENCHMENT IN VA. Let us now

look at the procedure for effecting lay-off and retrenchment.
Lay-off can be for half-a-day, a full day or more than one day but cannot amount
to retrenchment.
Stoppage of work must be notified on the notice board in accordance with the
provisions of Standing Orders
The period of detention after stoppage of work must not exceed two hours.
The maximum period of lay-off during a year cannot exceed 45 days.
A lay-off compensation ( the sum of 50% of wage and dearness allowance) has
to be paid.
There is no compensation after 45 days if an agreement to that effect is in place.
If the employers inability to provide employment exceeds 45 days, the employer
can retrench after adjusting the compensation paid for lay-off.
THE PROVISIONS FOR LAY-OFF AND RETRENCHMENT IN VB. In the provi-

sions outlined in Chapter VB, the employer prior to effecting lay-off, has to take permission
from the appropriate government.
THE P RO HIBIT IO N O F L AY- O F F

1. No workman whose name is borne on the muster rolls of an industrial establish-
ment shall be laid off by his employer except with the permission of the appropriate
government unless such lay-off is due to shortage of power or to natural calamity,
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and in the case of a mine, such lay-off is due also to fire, flood, excess of inflammable
gas or explosion.
2. An application for permission shall be made by the employer stating clearly the
reasons for the intended lay-off and a copy of such application shall also be served
simultaneously on the workmen concerned.
3. Where the workmen of an industrial establishment, being a mine, have been laid off
for reasons of fire, flood or excess of inflammable gas or explosion, the employer,
shall, within a period of 30 days from the date of commencement of such lay-off,
apply to the appropriate government for permission to continue the lay-off.
4. Where an application for permission has been made, the appropriate government
after making such enquiry and after giving a reasonable opportunity of being heard
to the employer, the workmen concerned by order and for reasons to be recorded in
writing, grant or refuse to grant such permission and a copy of such order shall be
communicated to the employer and the workmen.
5. Where an application for permission has been made and the appropriate govern-
ment does not communicate the order granting or refusing to grant permission to
the employer within a period of 60 days from the date on which such application
is made, the permission applied for shall be deemed to have been granted on the
expiration of the said period of 60 days.
6. An order of the appropriate government or the specified authority granting or refus-
ing to grant permission shall be final and binding on all the parties concerned and
shall remain in force for one year from the date of such order.
7. The appropriate government review its order granting or refusing to grant permis-
sion or refer the matter to a Tribunal for adjudication.
8 The compensation payable for lay-off shall be the same as payable under Chapter VA.
Explanation: For the purposes of this section, a workman shall not be deemed to be
laid-off by an employer if such employer offers any alternative employment (which
in the opinion of the employer does not call for any special skill or previous experi-
ence and can be done by the workman) in the same establishment from which he
has been laid-off or in any other establishment belonging to the same employer,
situated in the same town or village, or situated within such distance from the estab-
lishment to which he belongs that the transfer will not involve undue hardship to
the workman having regard to the facts and circumstances of his case, provided that
the wages that would normally have been paid to the workman are offered for the
alternative appointment also.
AP PLI C AT I O N O F SE CT I O NS 25C TO 25E

1. Sections 25C to 25E (inclusive) shall not apply to industrial establishments to which
Chapter VB applies, or to (i) industrial establishments in which less than 50 work-
men on an average per working day have been employed in the preceding calendar
month; or (ii) industrial establishments that are of a seasonal character or in which
work is performed only intermittently
2. If a question arises whether an industrial establishment is of a seasonal character or
whether work is performed therein only intermittently, the decision of the appropri-
ate government thereon shall be final.
CONDITIONS PRECEDENT TO THE RETRENCHMENT OF WORKMEN.

No workman employed in any industry who has been in continuous service for not less than
one year under an employer shall be retrenched by that employer until:
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a) The workman has been given one month’s notice in writing indicating the reasons
for retrenchment and the period of notice has expired, or the workman has been
paid in lieu of such notice wages for the period of the notice
b) The workman has been paid, at the time of retrenchment, compensation that shall
be equivalent to 15 days’ average pay (for every completed year of continuous ser-
vice) or any part thereof in excess of 6 months
c) Notice in the prescribed manner is served on the appropriate government (for such
authority as may be specified by the appropriate government by notification in the
official gazette).
12.12.6 Closure of Undertaking

Closure is when the business of an industrial establishment closes down. The Chapter VB
provisions for closure are given below.
SIXT Y DAY S’ NOT ICE TO BE G I VE N O F I NT E NT I O N TO CLO SE

DOWN ANY UND ERTAKING
1. An employer who intends to close down an undertaking shall serve, at least 60 days
before the date on which the intended closure is to become effective, a notice in the
prescribed manner, on the appropriate government stating clearly the reasons for
the intended closure of the undertaking, provided that nothing in this section shall
apply to an undertaking in which (i) less than 50 workmen are employed, (ii) less
than 50 workmen were employed on an average per working day in the preceding
12 months, or (iii) an undertaking set up for the construction of building, bridges,
roads, canals, dams or for other construction work or project
2. Notwithstanding anything contained in subsection (1), the appropriate government
may, if it is satisfied that owing to such exceptional circumstances as accident in the
undertaking or death of the employer or the like, it is necessary so to do, by order,
direct that provisions of Subsection (1) shall not apply in relation to such undertak-
ing for such period as may be specified in the order.
CO M P ENSAT IO N TO WOR KM E N I N C ASE O F C LO SI NG D O WN

OF UND ERTAKINGS
1. Where an undertaking is closed down for any reason whatsoever, every workman
who has been in continuous service for not less than one year in that undertaking
immediately before such closure shall, subject to the provisions of Subsection (2),
be entitled to notice and compensation in accordance with the provisions of Section
25F, as if the workman had been retrenched: provided that where the undertaking
is closed down on account of unavoidable circumstances beyond the control of the
employer, the compensation to be paid to the workman under Clause (b) of Section
25F, shall not exceed his average pay for three months.
Explanation: An undertaking that is closed down for reasons of (i) financial difficul-
ties (including financial losses); (ii) accumulation of indisposed stocks; (iii) the expiry
of the period of the lease or license granted to it, or (iv) In case where the under-
taking is engaged in mining operations, exhaustions of the minerals in the area in
which operations are carried on, shall not be deemed to be closed down on account
of unavoidable circumstances beyond the control of the employer within the meaning
of the proviso to this subsection. Notwithstanding anything contained in subsection
(1), where an undertaking engaged in mining operations is closed down by reason
merely of exhaustion of the minerals in the area in which such operations are car-
ried on, no workman referred to in that Subsection shall be entitled to any notice or
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compensation in accordance with the provisions of Section 25F, if (i) the employer
provides the workman with alternative employment with effect from the date of clo-
sure at the same remuneration as he was entitled to receive, and on the same terms and
conditions of service, as were applicable to him, immediately before the closure; (ii)
the service of the workman has not been interrupted by such alternative employment;
and (iii) the employer is, under the terms of such alternative employment or other-
wise, legally liable to pay to the workman, in the event of his retrenchment, compensa-
tion on the basis that his service has been continuous and has not been interrupted by
such alternative employment
2. Where any undertaking set up for the construction of buildings, bridges, roads,
canals, dams or other construction work is closed down on account of the comple-
tion of the work within two years from the date on which the undertaking had
been set up, no workman employed therein shall be entitled to any compensation
under Clause (b) of Section 25F, but if the construction work is not so completed
within two years, he shall be entitled to notice and compensation under that sec-
tion for every completed year of continuous service or any part thereof in excess
of six months.
12.12.7 Last IN–First OUT

Where any workman in an industrial establishment is to be retrenched and he belongs to
a particular category of workmen in that establishment, in the absence of any agreement
between the employer and the workman in this behalf, the employer shall ordinarily retrench
the workman who was the last person to be employed in that category, unless for reasons to
be recorded, the employer retrenches any other workman.
12.12.8 Unfair Labour Practices

In 1984, unfair labour practices were introduced in the ID Act. The fifth schedule to the
Act lists down the activities, on part of both parties, that would constitute unfair labour
practice.
P RO H I BI T I O N O F UNFAI R LABO UR P R AC T I CE S
No employer or workman or a trade union, whether registered under the Trade
Unions Act, 1926 (16 of 1926), or not, shall commit any unfair labour practice.
Penalty for Committing Unfair Labour Practices: Any person who commits any
unfair labour practice shall be punishable with imprisonment for a term, which may
extend to six months, or with fine, which may extend to INR 1,000 or with both.
Penalty for Illegal Strikes and Lock-outs: Any workman who commences, continues
or otherwise acts in furtherance of a strike, which is illegal under this Act, shall be
punishable with imprisonment for a term that may extend to one month, or with
fine may extend to INR 50, or with both.
Any employer, who commences, continues, or otherwise acts in furtherance of a
lockout, which is illegal under this Act, shall be punishable with imprisonment for
a term that may extend to one month, or with fine, which may extend to INR 1,000,
or with both.
12.12.9 Settlement Machinery

Settlement means a settlement arrived at in the course of conciliation proceeding and includes
a written agreement between employer and workmen arrived at otherwise than in course of a
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conciliation proceeding where such agreement has been signed by the parties there to in such
manner as may be prescribed and a copy thereof has been sent to the officer authorized in
this behalf by the appropriate government and the conciliation officer. The definition envis-
ages two categories of settlement.
1. Settlement arrived at in the course of conciliation
2. Settlement arrived at privately or otherwise than in the course of conciliation
The settlement arrived at in the course of conciliation stand on a higher plane than the settle-
ments arrived at otherwise than in the course of conciliation. The legal effect of both these
settlements is not identical. The settlement arrived at otherwise than in the course concili-
ation binds only the parties to settlement and none else. In any case, it does not stand on
a plane higher than the settlements arrived at in the conciliation, and that makes the two
distinct and different from each other.
Procedures for Settling Labour Dispute: Collective bargaining, negotiation, conciliation
and mediation, arbitration and adjudication are well-known methods for the settlement of
industrial disputes.
Collective Bargaining: Collective bargaining is a technique by which disputes as to con-
ditions of employment are resolved amicably, by agreement, rather than by coercion. The
dispute is settled peacefully and voluntarily, although reluctantly, between labour and man-
agement. The content and scope of collective bargaining also varies from country to country.
Broadly speaking, collective bargaining is a process of bargaining between employers and
workers, by which they settle their disputes relating to employment or non-employment,
terms of employment or conditions of the labour of the workman, among themselves, on
the strength of the sanctions available to each side. Occasionally, such bargaining results in
an amicable settlement arrived at voluntarily and peacefully, between the parties. But quite
often, the workers and employers have to apply sanctions by resorting to weapons of strike
and lockouts, to pressurize one another, which makes both the sides aware of the strength of
one another, and that finally forces each of them to arrive at a settlement in mutual interest. It
is, thus, the respective strength of the parties that determine the issue, rather than the wordy
duals, which are largely put on for show, as an element of strength in one party is by the same
token an element of weakness in another. The final outcome of bargaining may also depend
upon the art, skill and dexterity of displaying the strength by the representatives of one party
to the other.
Negotiation: Negotiation is one of the principal means of settling labour disputes.
However, due to lack of trust between the employers and workmen or their trade unions
or inter-rivalry of the trade unions and the employers being in a commanding position,
many a time negotiations fail. Through Amendment in the ID Act in 1982, Chapter II
B, reference of certain individual disputes to Grievance Settlement Authority has been
inserted. Under this chapter, Section 9C has made it obligatory for the employers to
make provision for Grievance Settlement Authority for the settlement of industrial dis-
putes connected with an individual workman employed in an establishment, in which
50 or more workmen are employed or have been employed on any day, in the preceding
12 months. This amendment, however, made over 20 years back, has not seen the light
of the day.
Conciliation and Mediation: Through conciliation and mediation, a third party provides
assistance with a view to help the parties to reach an agreement. The conciliator brings the
rival parties together to discuss with them their differences and assist them in finding out a
solution to their problems. A mediator, on the other hand, is more actively involved while
assisting the parties to find an amicable settlement. Sometimes, he submits his own proposals
for the settlement of their disputes.
Conciliation may be voluntary or compulsory. It is voluntary if the parties are free to
make use of the same, while it is compulsory when the parties have to participate irrespective
of whether they desire to do so or not. Section 4 of the Act provides for the appointment for
conciliation officers and Section 5 for the constitution of Boards of Conciliation. The Board
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of conciliation is to consist of an independent chairman and two or four members represent-

ing the parties in equal number. While the former is charged with the duty of mediating in
and promoting the settlement of industrial disputes, the latter is required to promote the
settlement of industrial disputes. The Act generally allows registered trade unions or a sub-
stantial number of workers/employees, and also in certain cases, an individual workman to
raise disputes.
Arbitration: The resort to arbitration procedure may be compulsory or arbitrary. Compulsory
arbitration is the submission of disputes to arbitration without consent or agreement of the
parties involved in the dispute and the award given by the arbitrator being binding on the
parties to the dispute. On the other hand, in case of voluntary arbitration, the dispute can be
referred for arbitration only if the parties agree to the same. Section 10 A of the Act, how-
ever, provides only for voluntary reference of dispute to arbitration. This system, however,
has not been widely practised so far. One of the main reasons for this procedure not gaining
popularity is the lack of arbitrators who are able to command respect and confi dence of the
parties to the dispute. Inter-union rivalry also sometimes makes it difficult in arriving at
an agreement on settlement of an arbitrator who is acceptable to all the trade unions in the
industry.
Adjudication: If despite efforts of the conciliation officer, no settlement is arrived at between
employer and the workman, The Industrial Disputes Act provides for a three-tier system of
adjudication, viz., Labour Courts, Industrial Tribunals and National Tribunals under Sections
7, 7A and under Section 7B respectively. Labour Courts have been empowered to decide
disputes relating to matters specified in Schedule 2. These matters are concerned with the
rights of workers, such as propriety of legality of an order passed by an employer under the
Standing Orders, application and interpretation of Standing Orders, discharge or dismissal
of workman including reinstatement of grant of relief to workman wrongfully discharged or
dismissed, withdrawal of any customary concession or privilege and illegality or otherwise
of a strike or lockout.
The industrial tribunal is empowered to adjudicate on matters specified in both the
Second and Third Schedule, i.e., both rights and interest disputes. The jurisdiction of the
Industrial Tribunal is wider than the Labour Courts. In case of disputes, which, in the opin-
ion of the central government, involve question of national importance or is of such nature
that workers in more than one state are likely to be affected, the Act provides for constitution
of National Tribunals.
The Act was amended in the year 1956 providing for constituting Labour Courts and
national Industrial Tribunals. The subject of labour having been in the Concurrent List of
the Constitution of India, both the centre and states have the power to legislate on labour
matters. Several states have amended the Central Act, 1947 so as to suit to them, while others
have enacted their own Acts.
The main object of the enactment of the Act is to ensure social justice to both the employ-
ees and the employers and advance the progress of industry by bringing about the existence
of harmony and cordial relationship between the parties so as to bring about industrial peace,
which would accelerate procedure activity of the country. The Act provides for the preven-
tion and settlement of industrial disputes. “Industry” means a business, a trade, a manufac-
ture, an undertaking, or service.
12.12.10 Conclusion
Industrial peace and industrial harmony may have the same generic meaning; but look-
ing from the perspective of industrial relations, all attempts are made for industrial peace,
emphasizing on the absence of strife and struggle. The concept of industrial harmony is posi-
tive and comprehensive and it postulates the existence of understanding cooperation and a
sense of partnership between the employers and the employees. This is the ERM perspective
and a proactive approach would be to seek industrial harmony. The focus, therefore, has to
be on prevention of conflict in an organization.
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SUMMARY
Industrial disputes are those that arise due to any disagree- illegal or unlawful, conditions for laying off, retrenching,
ment in an industrial relation. discharging or dismissing a workman, circumstances under
which an industrial unit can be closed down and several
The term “industrial dispute” involves various aspects of
other matters related to industrial employees and employers.
interactions between the employer and the employees,
among the employees as well as between the employers. According to the Act, the term “industrial dispute” means
“any dispute or difference between employers and employers,
These disputes may take various forms such as protests,
or between employers and workmen, or between workmen
strikes, demonstrations, lockouts, retrenchment and dis-
and workmen, which is connected with the employment or
missal of workers.
non-employment, or the terms of employment or with the
Some of the important causes of an industrial dispute are conditions of labour, of any person”. The basic objectives of
demands for: the Act are to:
䊊 Higher wages and allowances 䊊 Provide a suitable machinery for the just, equitable and
peaceful settlement of industrial disputes
䊊 Payment of bonus and determination of its rate thereof
䊊 Promote measures for securing and preserving amity
䊊 Higher social-security benefits
and good relations between employers and employees
䊊 Good and safer working conditions, including length of
䊊 Prevent illegal strikes and lockouts
a working day, the interval and frequency of leisure and
physical work environment 䊊 Provide relief to workers against lay-offs, retrenchment,
wrongful dismissal and victimization.
䊊 Improved labour welfare and other benefits. For exam-
ple, adequate canteen, rest, recreation and accommoda- 䊊 Promote collective bargaining
tion facility and arrangements for travel to and from
䊊 Ameliorate the conditions of workers
distant places.
A strike is a form of industrial action, resorted to by work-
Besides, poor personnel management; conflicting legislative
men. It is a cessation of work by a body of workmen acting
measure or government policies; and psychological factors
in concert.
such as denial of opportunity to the worker for satisfying his/
her basic urge for self-expression, personal achievement and A lockout on the other hand is a coercive action by the man-
betterment may also result in labour problems. agement. It is the temporary closing down of a place of work
or refusal to employ the workmen.
In India, the Industrial Disputes Act, 1947 is the main legislation
for the investigation and settlement of all industrial disputes. Lay-off, retrenchment and closures are the commonest cause
for dispute. The ID Act, therefore, provides for a separate
The Act enumerates the contingencies when a strike or lock-
procedure to deal with these.
out can be lawfully resorted to, when they can be declared
KEY TERMS
adjudication 253 closure disputes of interest 253 lockout 246
arbitration 253 disputes of rights 253 retrenchment 264
collective bargaining 253 industrial dispute 247 strike 246
conciliation and mediation 271 lay-off 266
REVIEW QUESTIONS
1 Differentiate the concept of industrial conflict from the 3 What are the major causes of labour unrest? What have been the
industrial relations and employee relations perspective. major causes of industrial disputes in India in the last decade?
2 What are the types and forms of industrial disputes? Give 4 Discuss the provisions in the ID Act, 1947 with regard to
examples to explain. (i) strikes (ii) layoffs (iii) retrenchment, and (iv) unfair
labour practices
M12_SING6013_01_C12.indd 273 6/15/10 5:11:15 PM


1 Pick up any industry or sector and trace the incidents of 3 Discuss strategies to deal with resistance to any kind of
industrial unrest and conflict. Analyse the trends with regard organizational change through the employee-relations-
to causes, and discuss how they could have been prevented management approach.
or resolved.
2 Suggest ways and means to avoid industrial conflict and dis-

putes in India in the current globalized competitive growth
environment.
D E B AT E
1 Most disputes occur due to managerial negligence. 2 In a competitive industrial environment, conflicts and dis-
putes are unavoidable.
Industrial Conflict and Unrest at Toyota Kirloskar Motor TKMEU on the other hand alleged that the management was
Company1 trying to curb legitimate union activities by victimizing those
who took active interest in union activities. The working condi-
The management at Toyota Kirloskar Motor (TKM) Private
tions in the plant, they alleged, were inhuman and dictato-
Limited, on January 8, 2006, declared a lockout of the manu-
rial against which it was the legitimate right of the unions to
facturing unit at Bidadi, Karnataka. The lockout was in retalia-
protest. The workers, allegedly, were made to work long hours
tion to a strike by the Toyota Kirloskar Motor Employees Union
without adequate compensation.
(TKMEU) three days ago. TKMEU was the recognized union in
the plant. The management, in its notice of lockout stated the In response, the employee union said that three employees
strike to be illegal since the union did not follow the provisions were dismissed because they were actively participating in
of the ID Act, 1947, requiring them to give 14 days’ notice. trade union activities and the company wanted to suppress
the trade union. They further said that working conditions at
As the name suggests, TKM was a joint venture between Toyota
the plant were inhuman and slave-like. They were often made
Motor Corporation and the Kirloskar Group with equity in
to stretch their working hours without sufficient breaks and/or
the ratio of 89:11 respectively. The plant had a capacity of
compensation.
producing 60,000 units per annum and Toyota had invested
nearly INR 15 billion in the facilities. Of the 2,400 employees, To resolve the conflict, when the State Labour Authorities called
65% were members of the recognized union (TKMEU). The unit both parties for a conciliatory meeting, the management took
at Bidadi manufactures models such as Innova, Corolla and a stand that the atmosphere was not conducive for any discus-
Camry. The strike by the Union was to demand reinstatement of sion since the union had vitiated the atmosphere and that they
3 employees who had been dismissed and 10 employees who (the management) anticipated violence. TKM appealed for two
had been suspended. The Union also demanded an improve- weeks’ time from the labour authorities but was granted three
ment in the working conditions at the plant. The dismissals days and was asked again to be present on the 12th January,
and suspensions were carried out on disciplinary grounds. 2006. TKMEU was clamouring for the intervention of the
Allegedly, the dismissed employees had assaulted a supervi- Government for resolution of the dispute.
sor. This action by management resulted in a strike call by
The unions canvassed for support and gathered the same from
the Union and three days later, a lockout by the management.
various other trade unions. The production, in the meantime,
The management did not agree to the demand of the Union to
fell to just 32 vehicles per day from the normal output of
reinstate the dismissed employees and revoke suspension of the
around 90 a day. TKM, because of reduced production, was
others. The management, further, made it clear that it would not
losing out on sales. The skeleton production was being carried
rehire the dismissed employees under any circumstances.
out with the help of non striking employees and management
Alleging strong arm tactics of the union with threats of blowing staff specially trained for the same.
up LPG cylinders and inciting other non striking workers, intimi-
The state government declared the strike to be illegal on
dating them, obstructing movement of goods to and from the
January 21, 2006. The management withdrew the lockout
plant, the management said it had no option but to declare an
saying that the workers were eager to return to work. However,
indefinite lockout of the plant.
the management put a condition that before lifting of lockout,
M12_SING6013_01_C12.indd 274 6/15/10 5:11:15 PM

workers would have to give an undertaking for “good con- Questions:

duct” so that the atmosphere is strife free and production
1. Prepare a report in the light of the “big picture” of the
could go on full stream. Since the strike was declared “illegal”,
Industrial Relations Framework with special reference to
the Union withdrew the strike and the matter was referred to
your opinion as to the adequacy or inadequacy of the frame
adjudication. But the Union refused to accept the demand for
work in dealing with industrial action.
signing undertaking for good conduct.
2. Do you think that the “lockout” declared by the Toyota
This conflict had implications for attracting FDI in India. Now,
Motors was legal? Why? Do you think the strike by the
TMC has reservations about investing in a second unit in the
workman was illegal? Why or why not?
state. There has been a spate of such industrial unrest in the
auto manufacturing in India, the most notable being the violent 3. How would you interpret the above incident from an
conflict at the Honda Motor & Scooters India Limited. Such employee relations perspective? Do you think that the
incidents may mar the perception of India as an attractive FDI employee relations perspective has limitations in dealing
destination in the minds of Japanese business, one of the larg- with such situations?
est investors in India.
NOTES
1 The Financial Express, “Signs of Thaw,” The Financial 2 BS Bureau, “Lockout at Toyota Car Plant,” Business Standard,
Express, January 21, 2006, available online at http://www. January 2006, available online at http://in.rediff.com/
financialexpress.com/news/sign-of-thaw-toyota-lifts- money/2006/jan/09toy.htm.
lockout/99843/ and.
SUGGESTED READING
Goswami, V. G. Labour and Industrial Law, Eighth Edition, The Government of India, Report of the Second National
Allahabad: Central Law Agency, 2004. Commission on Labour, 2002.
Monappa, Arun Industrial Relations, New Delhi: TMH 1985. The Industrial Disputes Act, 1947 (The Bare Act)
The Government of India, Indian Labour Yearbook, New Delhi: Venkatratnam, C.S. Industrial Relations, New Delhi: Oxford
Labour Bureau, Various Years. University Press, 2006
The Government of India, Report of the National Commission on

Labour, 1969
M12_SING6013_01_C12.indd 275 6/15/10 5:11:16 PM

chapter thirteen
13.1 The Settlement of Disputes: An Overview After reading this chapter, you will be able to:
13.2 Conciliation • Understand the machinery available for
13.3 Obligations of Employers settlement of industrial disputes
13.4 Obligations of Employees • Understand the processes of conciliation,
13.5 The Board of Conciliation arbitration and adjudication
13.6 The Performance of Conciliation • Know the recommendations made by the
Machinery Second National Commission of Labour
13.7 Arbitration on changes required in the settlement
13.8 Adjudication machinery
13.9 The Recommendation of the National
Commission on Labour on Settlement
Machinery
Status Quo Ante?

Amit Biswas is happy today because the matter relating to working hours of the employees of his branch has finally
been sorted out. Slightly more than three years ago, the management had signed a “settlement” with the recognized
union, increasing the working hours from 7 hours to 8.5 hours (including break). In lieu of the increase, the canteen
allowance paid to the employees was increased. The settlement was valid for a period of three years after which it was
terminable by either party on giving a three months’ notice. On expiry of 2.5 years, the employees indicated that they
were not willing to continue with the terms of settlement after expiry, and that they would want to revert to the old tim-
ings and working hours. This would disrupt the operations of the branch and, therefore, the management did not agree
to what the employees demanded. Th e earlier settlement was signed through “conciliation” between the two parties by
the concerned conciliation officer. This time, too, the conciliation officer was involved in resolving the dispute, and he
urged the two parties to discuss and narrow down their differences so that a new “settlement” could be signed. In the
mean time, on the expiry of three years, the employees reverted to the earlier work timings, causing inconvenience to
the customers and the image of the branch. The situation became really tense, and the parties could not resolve the issue
even through the intervention of the conciliation officer, who formally wrote to the government that his efforts had
failed. Finally, the matter was “referred” to the Labour Court by the concerned government, wherein the court ruled
that till a time a fresh settlement replaces the existing one, the employees are bound by the terms of the settlement in
operation. The “earlier” working hours no longer existed and were replaced by the new working hours. Since it was an
award of the Labour Court, the employees, too, realized that a fresh settlement had to be signed, and till then, the cur-
rent working arrangement was to continue.
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Industrial Conflict: Settlement
Machinery
Industrial conflicts arise despite the existing preventive machinery to assume threatening proportions. There
is a ‘settlement’ machinery in place which attempts to facilitate the ‘settlement’ of ‘disputes’ at as early a stage
as feasible so as to prevent them from taking a dysfunctional and harmful shape. The Industrial Disputes Act,
1947 lays down the settlement procedure, systems and structure in detail.
Sometimes, negotiations and discussions do not work despite best intentions, as in the above case.
The government, as a stakeholder in national progress, cannot sit as a bystander and let disputes as-
sume larger dimensions. There is elaborate machinery in place that is intended to settle a dispute or
resolve a conflict that could not be sorted out bilaterally through discussions and negotiations. As
a manager, it is important to have a general overview of the settlement machinery, which should be
made use of during a conflict that appears going out of hand. The provisions for the settlement of
industrial disputes are codified in the Industrial Disputes Act. Recall the “big picture” (Figure 12.1 in
Chapter 12). The settlement machinery is outlined in the lower portion of the figure.
13.1 The Settlement of Disputes: An Overview

Cordial industrial relations and lasting industrial peace require an environment of mutual coopera-
tion and trust, resolution of conflicting interests and a collaborative work culture. In case conflicts
arise, all attempts need to be made to eliminate the cause of such a conflict. In other words, preven-
tive steps should be taken so that industrial disputes do not occur. Preventive measures seek to create
an environment where industrial disputes do not arise. But if preventive machinery fails, then the
government should activate the industrial settlement machinery because non-settlement of disputes
proves to be harmful not only for the workers, but also for the management and the society as a
whole. The registration of an industrial dispute necessitates the identification of a method for its
resolution for harmonious industrial relations.
A “process flow” of the settlement process is given in Figure 13.1. Students are advised to
refer to this figure, when we discuss the various components and sub-processes of the settlement
machinery.
The machinery for the settlement of industrial disputes has been provided under the Industrial
Disputes Act, 1947. This machinery comprises:
a) Conciliation
b) Arbitration
c) Adjudication
Box 13.1 contains the ILO recommendation on the principles for constituting voluntary conciliation
and arbitration mechanisms. What this recommendation means is that the constituent members of ILO,
while legislating for dispute-settlement machinery, must keep these recommendations in mind. As we
proceed through the chapter, we will see that the legislative provisions relating to conciliation and arbi-
tration (in Industrial Disputes Act, 1947) are in complete consonance with the ILO recommendations.
M13_SING6013_01_C13.indd 277 6/15/10 3:38:01 PM

Figure 13.1
The process flow of Conciliation Settled Settlement
settlement machinery.
• Conciliation Officer
Dispute • Board of Conciliation Failed
• Court of Enquiry
Failure Report
Adjudication
Voluntary Arbitration
National
Labour Court Tribunal
Tribunal
Award
BOX 13.1 RECOMMENDATION 92 OF ILO CONCERNING VOLUNTARY CONCILI-

ATION AND ARBITRATION (1951): THE GENERAL CONFERENCE OF THE
INTERNATIONAL LABOUR ORGANIZATION
I. Voluntary Conciliation
1. Voluntary conciliation machinery, appropriate to national conditions, should be
made available to assist in the prevention and settlement of industrial disputes
between employers and workers.
2. Where voluntary conciliation machinery is constituted on a joint basis, it should
include equal representation of employers and workers.
3. <The third point seems to be missing!>
(1) The procedure should be free of charge and expeditious; such time limits for
the proceedings as may be prescribed by national laws or regulations should
be fixed in advance and kept to a minimum.
(2) Provision should be made to enable the procedure to be set in motion, either
on the initiative of any of the parties to the dispute or ex officio by the voluntary
conciliation authority.
4. If a dispute has been submitted to conciliation procedure with the consent of all
the parties concerned, the latter should be encouraged to abstain from strikes and
lockouts while conciliation is in progress.
5. All agreements that the parties may reach during the conciliation procedure or as
a result thereof should be drawn up in writing and be regarded as equivalent to
agreements concluded in the usual manner.
II. Voluntary Arbitration
6. If a dispute has been submitted to arbitration for final settlement with the consent of
all parties concerned, the latter should be encouraged to abstain from strikes and
lockouts while the arbitration is in progress and to accept the arbitration award.
III. General
7. No provision of this Recommendation may be interpreted as limiting, in any way
whatsoever, the right to strike.
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Industrial Conflict: Settlement Machinery 279
13.2 Conciliation
Conciliation or mediation signifies third-party intervention in promoting the voluntary
settlement of disputes. It is equated with mediation. The International Labour Organization
describes “conciliation” as the practice by which the services of a neutral third party are
used in a dispute as a means of helping the disputing parties to reduce the extent of their
differences and to arrive at an amicable settlement or agreed solution1. It is a process of
rational and orderly discussion of differences between the parties to a dispute under the
guidance of a conciliator. Conciliation has not been defined under any of the Indian Labour
Laws, although the ID Act, 1947 has made provisions for conciliation as an important tool
for dispute settlement. Conciliation, as a method of dispute resolution, must allow the use
of different approaches in differing situations. The conciliator is not a judge and does not
have any “powers” to impose an agreement or settlement between the parties. All he can
do is to try and narrow down the differences through discussions and suggestions. The
conciliator assists the parties to dispute in their negotiations by removing bottlenecks in
communication between them. Statutory provision for the conciliation machinery in the
country was made for the first time in the Trade Disputes Act of 1929, which provided
for the setting up of Boards of Conciliation by the government for settling industrial dis-
putes. On the recommendation of the Royal Commission of Labour, the Trade Disputes
Act of 1929 was amended in 1938 to provide for the appointment of conciliation officers.
Conciliation machinery, as provided under the Industrial Disputes Act, 1947, comprises
conciliation officers and the Board of Conciliation. So, the conciliation machinery com-
prises the following:
Conciliation by an officer [Sn.4 & 2(d)]
A Board (an ad-hoc Board consisting of a Chairman and equal number of workmen
and the employer’s representatives [Sn.5 & 2(e)]
Court of Enquiry
The Board is not a permanent body. It is set up only for a particular dispute and will stand
dissolved when the issue is settled. A Court of Enquiry assists with the investigation of issues
during the conciliation stage. However, the Board of Conciliation and Courts of Enquiry are
hardly ever constituted these days.
13.2.1 Conciliation Officers

The ID Act, 1947 provides for the appointment of conciliation officers, permanently or
for a limited period, for a specific area or for a specific industry, to which the industrial
disputes shall be referred for conciliation. The conciliation officer enjoys the powers of a
civil court; he can call and witness parties on oath. Section 4 of the Industrial Disputes Act,
1947 confers power upon the government to appoint conciliation officers by notification
in the official gazette, for a specified area or for one or more specified industries for the
purpose of mediating in and promoting the settlement of industrial disputes. The concili-
ation officer examines all facts relevant to the disputed matter, and then helps both parties
with discussion on the areas of dispute with the aim of progressively narrowing down the
dispute.
DUT IES AND P O WERS OF C O NC I LI AT I O N O F F I CE R S. The duties

and powers of a conciliation officer are given below:
Powers of Conciliation Officer:
Section 11 (2) of the Industrial Disputes Act, 1947, prescribing the powers of the con-
ciliation officers, states that such officer may, for the purpose of inquiry into existing
or apprehended industrial dispute, after giving reasonable notice, enter the premises
occupied by an industrial establishment to which the dispute relates.
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Section 11 (4) permits a conciliation officer to enforce the attendance of any person
for the purpose of examination of such person or call for and inspect any document
that he has ground for considering to be relevant to the industrial dispute or to be
necessary for the purpose of verifying the implementation of any award, or carrying
out duty imposed on him under this Act, and for the aforesaid purposes, the concili-
ation officer shall have the same powers as are vested in a civil court under the Code
of Civil Procedure, 1908 (5 of 1908), in respect of enforcing the attendance of any
person and examining him or of compelling the production of documents.
Section 11 (6) allows all conciliation officers, members of a Conciliation Board or
Court of Enquiry and the Presiding Officers of a Labour Court, Tribunal or National
Tribunal to be deemed public servants within the meaning of Section 21 of the India
Penal Code.
Duties
D of Conciliation Officers: Section 12 of the Industrial Disputes Act, 1947 prescribes
Duties of Conciliation
the
t duties of conciliation officers:
Officers
May intervene as a If the employer and the workmen fail to arrive at a settlement through negotiations,
mediator if disputants the conciliation officer may intervene as a mediator, endeavour to reconcile the dif-
fail to arrive at a settle- ferences of opinion and help the labour and management in achieving a successful
ment on their own settlement. Intervention by the conciliation officer is mandatory in case an industrial
Must intervene in case dispute has arisen in a public-utility service and a notice of strike or lockout (under
of a strike notice in a
Section 22) has been served.
public-utility service
Investigate and facili- The conciliation officer shall, for the purpose of bringing about a settlement of
tate the resolution of dispute, without delay, investigate the dispute and all matters affecting the merits
disputes
and the right settlement thereof and may do all such things as he thinks fit for the
Help arriving at a
purpose of inducing the parties to come to a fair and amicable settlement of the
settlement
dispute.
In case of failure, send
a “failure report” to The conciliation officer shall send a report of proceedings to the government, as to
the appropriate gov-
whether the settlement has been achieved or not, within 14 days of the commence-
ernment
ment of the conciliation proceedings or within such extended time as may be allowed
Conciliate in cases of
“notice of change” and in the prescribed manner.
If a settlement is arrived at as a result of conciliation proceedings, a memorandum of
settlement is worked out and it becomes binding on all the parties concerned for a
period agreed upon.
If no settlement is arrived at, the conciliation officer shall, as soon as practicable after
the close of investigation, send a full report to the government, setting forth the steps
taken by him for ascertaining the facts and circumstances relating to the dispute and
for bringing about a settlement thereof, and the reasons on account of which a settle-
ment could not be reached.
If, on a consideration of the report referred to in Sub-section (4), the appropriate
government is satisfied that there is a case for reference to a Board (Labour Court,
Tribunal or National Tribunal), it may make such reference. Where the appropriate
government does not make such a reference, it shall record and communicate to the
parties concerned its reasons thereof.
A report under this section shall be submitted within 14 days of the commencement
of the conciliation proceedings or within such shorter period as may be fixed by the
appropriate government.
SETTLEMENT. A conciliation officer helps the parties in dispute to arrive at a “settlement”.

However, the parties themselves may also arrive at a settlement without the help of a conciliation
officer. A settlement basically means a formal agreement and it can either be arrived at bilaterally
[Section 18(1) and 18(3)] or through the help of a third party (conciliation officer) in the course of
M13_SING6013_01_C13.indd 280 6/15/10 3:38:07 PM

conciliation proceedings [Section 12(3)]. In case of a bipartite settlement, a copy of the settlement
Settlement
may be jointly forwarded by both the parties to the conciliation officer for registration, whereas in
case of tripartite settlement, the conciliator is also a signatory in addition to the representatives of A settlement is an
the two parties. The terms of a bipartite settlement are binding on the parties to the settlement (the agreement arrived at
between two parties
members of a union that is not signatory to the settlement may not be bound by the terms of set- regarding a dispute.
tlement. Similarly, employees who join the organization after the settlement was signed may not It may be bipartite
be bound by the terms of settlement). However, a tripartite settlement is binding on all (employers (S 18-1 or 18-3) or
and their successors/heirs, all employees employed in the establishment, even those not belonging tripartite (S 12-3)
to the representative union and future entrants to the organization). Settlements under S
Settlement arrived at, in the course of conciliation proceedings [Section 12(3)] comes 18 are binding on
into operation: the parties to dispute
alone.
On such date as is agreed upon by the parties to the dispute; and Settlements under 12-3
are binding on all.
Where no such date is agreed upon, on the date on which the memorandum of settle- Settlements under S
ment is signed by the parties to the dispute. 12-3 are arrived at in the
course of conciliation.
The settlement shall be binding:
For the period agreed upon by the parties; and
Where no such period is agreed upon, for a period of six months from the date on
which the memorandum of settlement is signed.
The settlement shall remain binding for a further period until the expiry of two months from
the date on which a notice in writing for termination of the settlement is given by any one
party to the other party or parties.
13.2.2 The Protection of Workmen During Pendency

of Conciliation Proceedings
During pendency of any conciliation proceedings before a conciliation officer in respect of
any dispute, no employer can alter the conditions of service to the prejudice of the workmen
concerned with the dispute or dismiss or punish any such workmen without obtaining writ-
ten permission of the authority concerned.
13.3 Obligations of Employers

The employers have certain obligations with regards to conciliation proceedings and also the
conditions leading to the need for conciliation and the implementation of settlement:
1. Not to make any change in the service condition of the workmen without giving a
notice prescribed under Section 9A
2. To assist the conciliation officer in resolving any dispute
3. To implement all agreements, settlements and awards
4. To maintain a muster-roll of the workmen employed in the establishment, even at
the time when workmen have been laid-off, and to ensure that the names of the
workmen who present themselves for work at the appointed hours are entered
therein. This is desirable as it could be a source of future dispute.
5. Not to declare, support or finance an illegal lock-out, in the establishment
6. Not to lay-off or retrench any workman or close down any undertaking, without
obtaining prior approval of the government if so required.
7. To pay lay-off, retrenchment and closure compensation and compensation for ille-
gal lock-out to workers, as prescribed under the provisions of the Act.
8. Not to indulge in unfair labour practices
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13.4 Obligations of Employees

Similarly, employees and their representatives too have certain obligations:
1. To assist and cooperate with the conciliation officer in resolving any industrial
dispute
2. Not to participate in, support or finance an illegal strike
3. To abide by all agreements, settlements and awards
4. Not to indulge in unfair labour practices
13.5 The Board of Conciliation

The Act also empowers the government to appoint a Board of Conciliation for promoting
the settlement of disputes where the conciliation officer fails to do so within 14 days. The
Conciliation Board is a tripartite ad hoc body consisting of a chairman and two to four other
members nominated by the parties to the dispute. The mode and procedure of the function-
ing of the Board are similar to those of the conciliation officer.
The chairman shall be an independent person and the other members shall be per-
sons appointed in equal numbers to represent the parties to the dispute and any per-
son appointed to represent a party shall be appointed on the recommendation of
that party, provided that if any party fails to make a recommendation as aforesaid
within the prescribed time, the appropriate government shall appoint such persons
as it thinks fit to represent that party.
A Board, having the prescribed quorum, may act notwithstanding the absence of the
chairman or any of its members or any vacancy in its number, provided that if the
appropriate government notifies the Board that the services of the chairman or of any
other member have ceased to be available, the Board shall not act until a new chair-
man or member, as the case may be, has been appointed.
The conciliation machinery can take note of the existing as well as apprehended disputes
either on its own or on being approached by any party to the dispute. While conciliation
is compulsory in all public-utility services, it is optional in non-public-utility services. In
conciliation, the ultimate decision rests with the parties themselves, but the conciliator
may offer a solution to the dispute acceptable to both the parties and serve as a channel
of communication. The parties may accept the recommendation for settlement of any
dispute, or reject it altogether. If conciliation fails, the next stage may be compulsory adju-
dication. Broadly speaking, the conciliators bring the contending parties to a conference
table and endeavour at least to narrow down the differences between them by removing
the sources of friction and tension, and help them to find common areas of agreement.
They have no power to decide the disputes or pass a final or binding order on the parties.
In cases where a settlement is arrived at, they can record the settlement, and in cases of
failure of the conciliatory negotiations, they can only send a failure report to the appropri-
ate government. It should be noted that they are required under the Act to conclude their
proceedings within 14 days, while Boards are allowed 2 months, unless the parties agree
for a further extension of the time limit. A memorandum of settlement will be binding on
the parties for six months from the date of its signing or for such period as may be agreed
to between the parties. Even after the expiry of such period, the agreement remains in
operation until one of the parties, which is unwilling to continue it, gives a notice for its
termination.
Settlements can also be arrived at by the parties when a dispute is pending before the
Labour Court or Industrial Tribunal. Moreover, such settlements can be included in the
awards of the Labour Court/Industrial Tribunal in order to give them a legal status. These are
called “consent awards”.
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13.6 The Performance of Conciliation

Machinery The Performance of
Conciliation Machinery
Although conciliation has brought about resolution of a large number of conflicts, it has, It is treated as a pre-
however, been subjected to several criticisms: liminary step, leading
to adjudication.
i) Considerable delays are usually involved in conciliation proceedings. Considerable delays are
ii) The parties to the dispute, many times, do not attend conciliation meetings on the usually involved in con-
ciliation proceedings.
prescribed dates.
Parties to the dispute,
iii) It is alleged that most conciliation officers lack training and competence in concilia- many times, do not
tion work. attend conciliation
meetings on the pre-
iv) Conciliation is treated as a preliminary step leading to adjudication through the scribed dates.
Labour Courts or Tribunals. There is a perception
that most conciliation
In such a state of affairs, the parties do not feel the urge strongly to arrive at a settlement. The officers lack training
performance of conciliation machinery cannot be said to be satisfactory. It is estimated that and competence in
only 25 per cent of cases are annually handled. Besides, a very large number of disputes are conciliation work.
filed and then withdrawn later on by workers or unions. It means that petty issues are taken
up for conciliation. Finally, a substantial number of cases remain pending.
The Second National Commission on Labour stated that “conciliation can be more effec-
tive if it is freed from outside influence and the conciliation machinery is adequately staffed.
The independent charter of the machinery will alone inspire greater confidence and will be
able to evoke more cooperation from the parties. The conciliation machinery should, there-
fore, be a part of the proposed Industrial Relations Commission. This transfer will introduce
important structural, functional and procedural changes in the working of the machinery as
it exists today. There is a need for certain other measures to enable offices of the machinery
to function effectively. Among these are:
1. Proper selection of personnel
2. Adequate pre-job training
3. Periodic in-service training
Other suggestions that may be considered to facilitate speedy disposal of cases are:
i) The conciliation officer should hold conciliation proceedings in the concerned
establishment, instead of calling the parties to his office.
ii) S/he should have the statutory power of enforcing attendance of the parties before
them on the prescribed date.
iii) S/he should dispose of the cases within the time limit as far as possible”.2
13.7 Arbitration
Arbitration aims to secure an award on an issue of conflict by referring it to an impartial third
party called the “arbitrator”. The arbitrator hears both parties involved in the conflict, deter-
mines the cause and origin of conflict, understands the differing perceptions and attempts to
evolve an amicable solution. The decision of the arbitrator is binding on both the parties.
Arbitration is different from conciliation in the fact that the arbitrator is empowered
to decide on a dispute, and his/her decision is binding on both the parties. Unlike con-
ciliation, the arbitrator does not just attempt to reconcile differences, but brings about a
settlement through an agreement between the contending parties after hearing both the
parties. Arbitration is more judicial than conciliation, and is based on equality and justice.
Compromise has no place in arbitration.
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Table 13.1
Advantages Disadvantages
The advantages and
disadvantages of If voluntary, acceptability of the settlement It deprives labour of its right to strike.
arbitration.
by both parties would be greater.
Judgment is often arbitrary, and can
If arbitration is established by agreement, it is often be biased.
more flexible.
It is more directive than participative.
It is more expeditious than other methods of
Delays can affect morale of the
settlement.
parties.
It is more informal.
There is a greater chance of implementation.
Approach: The approach to be followed in arbitration is to base the agreement on the prin-
ciple of natural justice with “split the difference” approach that is workable and acceptable to
both the parties.
Type: Arbitration can be compulsory or voluntary.
Competence for Arbitration: High integrity, impartiality, knowledge of labour laws, deep
understanding of the issues of conflict and sensitivity to the issues of concern are few of the
competencies required for effective arbitration. The advantages and disadvantages of arbitra-
tion as a settlement technique are summarized in Table 13.1.
13.7.1 Compulsory Arbitration

Compulsory arbitration is one where the parties are required to accept arbitration without
any willingness on their part. When one of the parties to an industrial dispute feels aggrieved
by an act of the other, it may apply to the appropriate government to refer the dispute to adju-
dication machinery. Under compulsory arbitration, the parties are forced to arbitration by
the State, when the parties fail to arrive at a settlement by a voluntary method. Compulsory
arbitration leaves no scope for strikes and lockouts; it deprives both the parties of their very
important and fundamental rights.
13.7.2 Voluntary Arbitration

Voluntary arbitration is a choice made by the contending parties for arbitration, before refer-
ring it for adjudication. Voluntary arbitration became popular as a method of settling differ-
ences between workers and the management with the advocacy of Mahatma Gandhi, who
had applied it in the textile industry of Ahmedabad. However, voluntary arbitration was lent
legal identity only in 1956, when the Industrial Disputes Act, 1947 was amended to include
a provision relating to it (Section 10-a). On the failure of conciliation proceedings, the con-
ciliation officer may ask the parties to refer the dispute to a voluntary arbitrator. Voluntary
arbitration refers to getting the disputes settled through an independent person, chosen by
the parties, involved mutually and voluntarily.
An amendment in 1956 introduced Section 10A in the ID Act, making provision for a
joint reference of industrial disputes to voluntary arbitration. But the State, in its efforts to
resolve industrial disputes, had to provide for arbitration machinery, which could be done
either by creating conditions in which arbitration would succeed. The provision for voluntary
arbitration was made because of the lengthy legal proceedings and formalities, and the result-
ing delays involved in adjudication. It may, however, be noted that an arbitrator is not vested
with any judicial powers. It is a quasi-judicial process, where the arbitrator sits in judge-
ment on the proceedings, and after coming to a decision, makes it known to the parties. S/he
derives his/her powers to decide the dispute from the agreement that the parties have made
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between themselves regarding the referring of dispute to the arbitrator. The arbitrator sub-
mits his/her award to the government. The government then may publish it within 30 days
of its submission. Voluntary arbitration is the next best alternative to conciliation, which is
built on a democratic process and is a close substitute to collective bargaining. It not only
provides a voluntary method of settling industrial disputes, but is also a quicker way of set-
tling them. It is based on the notion of self-management in industrial relations. Furthermore,
it helps to curtail the protracted proceedings that adjudication entails. It demonstrates a col-
laborative attitude, assists in strengthening the trade-union movement and contributes for
building up stable industrial relations. Thus, it is a democratic functioning in the industry
and inculcates some degree of union–management accommodation. The main ingredients of
voluntary arbitration are:
i) The industrial dispute must exist or be apprehended.
ii) The agreement must be in writing.
iii) The reference to voluntary arbitration must be made before a dispute has been
referred to under Section 10 to a Labour Court, Tribunal or National Tribunal.
iv) The name of arbitrator/arbitrators must be specified.
v) The arbitrator or arbitrators shall investigate the dispute and submit to the appropri-
ate government the arbitration award signed by the arbitrator or all the arbitrators,
as the case may be.
The principle of voluntary arbitration was incorporated in the Code of Discipline, Industrial
Truce Resolution of 1962, and also various Five Year Plans. The National Arbitration
Promotion Board (NAPB) was set up by the Government of India in 1967 to strengthen
the system of voluntary arbitration in our country. The Board consists of representatives of
employer and worker organizations, public-sector undertakings and central/state govern-
ment officials. Model principles were drawn up by the NAPB by tripartite consent. These
principles broadly lay down the circumstances under which individual as well as collective
disputes can be referred to voluntary arbitration. In 1972, the Board decided that volun-
tary arbitration would form the next step for resolving industrial disputes when conciliation
failed. Many state governments have set up Arbitration Promotion Boards.
13.7.3 National Arbitration Promotion Board

To make voluntary arbitration more acceptable to the parties and to coordinate efforts for its
promotion, the government appointed, in July 1967, a National Arbitration Promotion Board
with a tripartite composition. The functions of the Board are:
i) To examine the factors inhibiting arbitration
ii) To evolve principles, norms and procedures for the guidance of the arbitrator and
the parties
iii) To advise parties, in important cases, to accept arbitration for resolving disputes so
that litigation in courts may be avoided
iv) To look into the cause or causes of delay and expedite arbitration proceedings, wher-
ever necessary
v) To specify, from time to time, the types of disputes that would normally be settled by
arbitration in tripartite decisions
vi) To maintain a panel of suitable arbitrators
When V. V. Giri became Labour Minister in 1953, he laid greater emphasis on collective bar-
gaining and voluntary arbitration than on compulsory arbitration. Giri was of the opinion
that compulsory adjudication for labour disputes should be the last resort and it should be
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operationalized only in exceptional circumstances. According to Giri’s approach, emphasis

should be placed on collective bargaining and the mutual settlement of disputes through
voluntary arbitration.
13.7.4 The Evaluation of the Working of Voluntary

Arbitration
The system of voluntary arbitration, however, has not been used adequately in our country.
There exists general indifference among parties to use voluntary arbitration as a method of
settling disputes. Hardly 2 to 3 per cent of the disputes not settled by conciliation are referred
to voluntary arbitration. As observed by the NCL, voluntary arbitration has not taken root,
in spite of the influential advocacy for it in different policy-making forums. Factors that have
contributed to its slow progress are:
i) The easy availability of adjudication in case of failure of negotiations
ii) A dearth of suitable arbitrators who command the confidence of both the parties
iii) The absence of a recognized union, which could bind the workers to common
agreements
iv) Legal obstacles
v) The fact that in law, no appeal was competent against an arbitrator’s awards
vi) The absence of a simplified procedure to be followed in voluntary arbitration
vii) Cost to the parties, particularly workers
With the growth of collective bargaining and the general acceptance or recognition of rep-
resentative unions and improved management attitudes, the ground may be provided for
the acceptance of voluntary arbitration. Moreover, the success of this enlightened approach
depends upon the faith, trust, will and dignity, which employers and employees lend to its
implementation. Hence, all the participants in the process, viz., trade unions, employers, per-
sonnel executives and the arbitrators themselves have an equal stake in an orderly, efficient
and constructive arbitration procedure.
One of the main factors that acts as a hurdle to the maintenance and promotion of
industrial peace at present is the increasing resort to adjudication machinery in prefer-
ence to voluntary arbitration and conciliation. The state governments should take all the
necessary measures to encourage settlement of disputes through collective bargaining.
Box 13.2 extracts the views of the Second National Commission on Labour on volun-
tary arbitration. The general thrust in the matter of industrial disputes is to resolve the
disputes, as far as possible, through collective bargaining, conciliation and voluntary
arbitration.
13.8 Adjudication
The ultimate remedy for the settlement of an unresolved dispute is its reference by the gov-
ernment to adjudication. It is a means of a mandatory settlement of a dispute by Labour
Courts or Industrial Tribunal or National Tribunal under the ID Act and corresponding
State statutes. Adjudication may be described as a process that involves intervention in the
dispute by a third party appointed by the government, with or without the consent of the
parties to the dispute, for the purpose of settling the dispute. The reference of dispute to
adjudication is voluntary when both parties agree to reference of dispute to adjudication
at their own accord, and it is compulsory when reference is made to adjudication by the
government without the consent of either or both the parties to the dispute. The Industrial
Disputes Act, 1947 provides three-tier adjudication machinery that is set up by the govern-
ment comprising:
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BOX 13.2 NATIONAL COMMISSION ON LABOUR (SECOND) ON VOLUNTARY

ARBITRATION
6.92 We have, at several places so far, referred to arbitration or adjudication for determin-
ing disputes between management and labour. We feel arbitration is the better of the two,
for the reason that the procedures will be simple, the proceedings will not be tardy and the
decision will be rendered by a person in whom both parties have confidence. We would like
the system of arbitration to spread, and over time, become the accepted mode of determin-
ing disputes, which are not settled by the parties themselves. In fact, it would be desirable if
in every settlement entered into between the parties, (and we would urge that the duration of
each settlement be four years), there is a clause providing for arbitration by a named arbitra-
tor or panel of arbitrators of all disputes arising out of interpretation and implementation of
the settlement and any other disputes. The law may even lay down that such a provision be
deemed to be part of every settlement. By having a named person as an arbitrator during
the currency of a settlement, the arbitrator is able to familiarize himself with all aspects of the
activity in the establishment and to get to know the parties better; also, the fact that the person
will be the arbitrator, for better or for worse, during the entire period of the settlement will,
hopefully, make him impartial and also act in the best interests of the establishment.
6.93 Arising out of the above, we would like to suggest that a panel of arbitrators is main-
tained and updated by the LRC (Labour Relations Commission) concerned, which would con-
tain names of all those who are willing and have had experience and familiarity with labour
management relations; the panel may consist of labour lawyers, trade union functionaries,
employers, managers, officials of the labour department, both serving and retired, academ-
ics, retired judicial officers and so on. Some ground rules could also be framed in consulta-
tion with representatives of employers and workers, and these could include procedures for
selecting an agreed person from the panel, the cost of arbitration, and so on.
Source: Report of Second National Commission on Labour, 2002, Government of India, para 6.92
i) Labour Courts,
ii) Industrial Tribunals, at the state level, and
iii) National Tribunals at the central level.
The matters under the jurisdiction of Labour Courts and Tribunals have been specified in
the ID Act. The National Tribunals are set up by the central government to adjudicate upon
a dispute involving any question of national importance, or of such nature that industrial
establishments situated in more than one state are likely to be affected by it. The adjudication
award is legally binding. The parties to an industrial dispute are required not to resort to work
stoppages if the dispute is pending in an adjudication process.
13.8.1 Types of Adjudication

When the government gets a report of the failure of conciliatory proceedings to a dispute, it
considers the appropriateness to refer it for adjudication. The reference of a dispute to adju-
dication is at the discretion of the government. Adjudication can be voluntary or compulsory.
When reference to adjudication is made by the parties, it is called voluntary adjudication, and
when reference is made by the government without the consent of either or both the parties,
it is known as compulsory adjudication.
13.8.2 Labour Courts

One or more Labour Courts may be constituted by the appropriate government for adjudica-
tion on industrial disputes relating to any matter specified in Schedule 2 of the ID Act.
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ISSU E S R E F E R R E D TO LABO UR CO URT S. The Labour Courts can deal

with disputes relating to:
a) The propriety or legality of an order passed by an employer under the Standing Orders
b) The application and interpretation of Standing Orders
c) Discharge and dismissal of workmen and grant of relief to them
d) Withdrawal of any statutory concession or privilege
e) Illegality or otherwise of any strike or lock-out
f ) All matters not specified in the third schedule of Industrial Disputes Act, 1947
(it deals with the jurisdiction of Industrial Tribunals)—
1. Wages including the period and mode of payment
2. Compensatory and other allowances
3. Hours of work and rest intervals
4. Leave with wages and holidays
5. Bonus, profit sharing, provident fund and gratuity
6. Shift working otherwise than in accordance with standing orders
7. Rules of discipline
8. Rationalization
9. Retrenchment
10. Any other matter that may be prescribed
CO M P O SI T I O N. A Labour Court shall consist of one person only, who:

a) Is or has been a judge of a High Court; or
b) Has been, for a period of not less than three years, a District Judge; or
c) Has held any judicial office in India for not less than seven years
No person shall be appointed or continue in the office of the Labour Court, if he is not an
independent person, or if he has attained the age of 65.
D UTI E S O F LABO UR C O URT S. The Duties are:

i) To hold adjudication proceedings expeditiously; and
ii) To submit its award to the appropriate government as soon as practicable on the
conclusion of the proceedings
The Labour Court usually deals with matters that arise out of the day-to-day working of an
undertaking.
JUR I SD I C T I O N O F LABO UR CO URT S. The matters listed in Schedule 2

of the ID Act and any other matters except those in Schedule 3 are within the jurisdiction
of the Labour Courts. In case the appropriate government considers fit, it may refer matters
listed in Schedule 3 to the Labour Court in case the dispute concerns more than 100 workers.
Schedule 2 lists the following issues:
i) Propriety or legality of an order passed by an employer under the Standing Orders
ii) Application and interpretation of Standing Orders
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iii) Discharge or dismissal of workers, including reinstatement of, or grant of relief to,
workers wrongfully dismissed
iv) Withdrawal of any customary concession or privilege
v) Illegality or otherwise of a strike or lockout
vi) All matters other than those listed in Schedule 3
13.8.3 The Second National Commission on Labour

on Labour Relations Commissions
The Second National Commission on Labour, recognizing adjudication to be the prevalent
mode of settlement of industrial disputes, has recommended an “integrated adjudicatory
system” comprising labour courts, lok adalats, and labour relations commissions.
This system will deal with all matters arising out of employment relations but also
trends disputes in matters related to employment. There would be a Central Labour
Relations Commission (CLRC) for the central sphere and a State Labour Relations
Commission (SLRC) for the state sphere. The National Labour Commission would be
above these two and function as an appellate body. These bodies would be autonomous
and function as appellate tribunals over the labour courts. These bodies would have
members and a presiding officer—a person who is eligible for appointment as a judge
in a high court. The commissions would have representatives of employers, workers,
economists, leading trade unionists, etc. as members.
The government has, so far, not accepted the recommendations and, therefore, these
remain just that—recommendations. Incidentally, the First National Commission on Labour
had also recommended an Industrial Relations Commission along similar lines nearly forty
years back!
13.8.4 Industrial Tribunals

Industrial Tribunals are appointed by the appropriate government for adjudication in matters
listed in Schedule 3 prescribed under the ID Act, which affect the working of a company or
industry. The matters dealt with in the Industrial Tribunal are:
a) Wages , including the period and the mode of payment
b) Compensatory and other allowances
c) Hours of work and rest intervals
d) Leave with wages and holidays
e) Bonus, profit sharing, provident fund and gratuity
f) Shift working, other than in accordance with the Standing Orders
g) Classification of grades
h) Rules of discipline
i) Rationalization
j) Retrenchment of workmen and the closure of an establishment
k) Any other matter prescribed
COMPOSITION. A Tribunal shall consist of one or more persons, such as those who
i) Are or have been a judge of a High Court; or
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ii) Are or have been, for a period of not less than three years, a District Judge; or
iii) Hold or have held the office of Chairman or any other member of the Labour
Appellate Tribunal or any Tribunal for a period of not less than two years
The government may, if it deems fit, also appoint two persons as assessors to advise the
Tribunal in the proceedings before it.
The functions and duties of the Industrial Tribunal are judicial and have all attributes of
a court of natural justice. It may create new obligations or modify contracts in the interest
of industrial peace. The Tribunals are expected to give awards based on the peculiar circum-
stances of each dispute.
India has 12 central government Industrial Tribunals-cum-Labour Courts.
13.8.5 National Tribunals

These Tribunals are meant for those disputes, which, as the name suggests, involve the ques-
tions of national importance or issues that are likely to affect the industrial establishments of
more than one state.
The employers and unions use adjudication as a primary measure of resolving disputes.
About 90 to 95 per cent of disputes are referred to adjudication machinery on an average,
annually. However, the functioning of adjudication machinery has not been very satisfactory,
particularly because of the delays involved and the inefficient implementation of the awards.
13.8.6 The Performance of Adjudication Machinery

Adjudication has been the most popular measure of resolving disputes, accounting for more
than 90 per cent of the disputes every year.
However, because of the involved process, 50 to 60 per cent of the cases are decided in more
than a year, and 25 per cent of the cases take between 6 and 12 months. The state of the implemen-
tation of awards (requiring implementation) is also not very commendable, since 30 to 40 per cent
of the awards are not implemented by the date of enforcement. Incomplete and abrupt implemen-
tation of awards creates suspicion in the minds of workers and shakes their faith in the machinery.
Adjudication is not a democratic method and may create bitterness among the parties.
It tends to encourage litigation and irresponsible behaviour among employers and labour.
The functioning of the adjudication machinery has, in practice, been unsatisfactory mainly
because of procedural delays and delay in implementation of awards. Many employers resort
to appeal against implementation of awards that go against them. In rights disputes, this
becomes totally unfair for the workman. Delays in implementation erode the faith of workers
in the adjudication machinery. Adjudication is preferred more by employers who can afford
to spend more on the legal proceedings.
13.9 The Recommendation of the National

Commission on Labour on Settlement
Machinery
Conciliation: The Second National Commission on Labour observes that “the functioning of
The First National Commission on Labour had bemoaned that the functioning of the concili-
ation machinery was not found satisfactory due to the following reasons:
i) Delay in proceedings
ii) Lack of understanding of the issues involved
iii) Ad-hoc nature of the machinery
iv) Discretion vested in the government as regards reference of disputes
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As a result, the recommendation was to put the conciliation machinery under the proposed
Industrial Relations Commission and outside the control of the executive.
The Second National Commission, however, has observed that the conciliation machin-
ery has been very effective in resolving “interest disputes” but not so much in cases of “rights
disputes”. The Commission, therefore, recommends conciliation to be optional in cases of
rights disputes and compulsory in cases of interest disputes. Conciliation should also be com-
pulsory in the case of strike or lockout over any issue. Issues not setttled in conciliation must
be referred to either voluntary arbitration or compulsory arbitration by arbitrators main-
tained by the Labour Relations Commission.
The Second Commission also laments the inordinate delays in the implementation of
awards of labour courts, especially by large organizations, PSUs and other government orga-
nizations. The courts should, therefore, be given powers to issue decrees and initiate con-
tempt proceedings against the non-implementation of awards.
Like the First National Commission, the Second Commission also recommends setting
up of Labour Relations Commissions (LRCs). There could be LRCs at the central and the state
levels, under a National Labour Relations Commission. The LRCs could entertain appeals on
judgements from the labour courts. Further, the NCL recommends the abolition of tribunals. The
LRCs would supervise the functioning of labour courts within their respective jurisdictions.
The best way to settle industrial disputes is for the parties to the dispute to talk over their
differences on the table and settle them by negotiation and bargaining. A settlement so reached
leaves no rancour behind and helps to create an atmosphere of harmony and cooperation.
There should be a shift to collective bargaining. Disputes between employers and workers, the
Commission observes, have been taking a legalistic turn, mainly because of the emphasis on
adjudication through Industrial Tribunals and courts. The procedure for the settlement of dis-
putes, suggested by the Commission, is as under:
After negotiations have failed and before the notice of a strike/lockout is served, the
parties may agree to voluntary arbitration. The IRC (Industrial Relations Commission)
will help the parties in choosing a mutually acceptable arbitrator or may provide an
arbitrator from among its members/officer, if the parties agree to avail of such services.
In essential services/industries, in the event of the failure of negotiations and concili-
ation, arbitration must be compulsorily resorted to. The arbitrator must be from a list
of approved arbitrators maintained by the respective LRC.
Adjudication should be resorted to only after exhausting the above.
SUMMARY
Broadly speaking, the statutory settlement machinery evolved Arbitration is another option that aims to secure an award
in our country is of two types. One deals with direct settlement, on an issue of conflict by referring it to an impartial third
which is the adjudication process, while the other is through party called the “arbitrator”.
third-party intervention by conciliation and arbitration.
The arbitrator hears both the parties involved in the conflict,
The administration of the settlement machinery is determines the cause and the origin of conflict, understands
prescribed in the Industrial Disputes Act, 1947. the differing perceptions and attempts to evolve an amicable
solution.
Conciliation machinery prescribed under the ID Act
includes conciliation officers and conciliation Boards. While The decision of the arbitrator is binding on both the parties.
conciliation is compulsory in all public-utility services, it is Arbitration can be compulsory by way of government
not so in non-public-utility services. initiative, or voluntary by the acceptance of both the
contending parties.
In conciliation, the ultimate decision rests with the parties
themselves, but the conciliator may offer a solution to Voluntary arbitration was lent legal identity only in 1956,
the dispute acceptable to both the parties and serve as a when Industrial Disputes Act, 1947 was amended to include
channel of communication. The parties may accept his a provision relating to it. On the failure of conciliation
recommendation for the settlement of dispute or reject it proceedings, the conciliation officer may persuade the
altogether. parties to refer the dispute to a voluntary arbitrator.
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Voluntary arbitration refers to getting the disputes settled Standing Orders, propriety of orders passed under Standing
through an independent person chosen by the parties Orders, legality of strikes, of lock-outs, etc.
involved mutually and voluntarily.
Industrial Tribunals deal with collective disputes such as
The ultimate remedy for the settlement of an unresolved wages, hours of work, leave, retrenchment, closure as well
dispute is its reference by the government to adjudication. It as all matters that come under the jurisdiction of Labour
is a means of a mandatory settlement of a dispute by Labour Courts.
Courts or Industrial Tribunal or National Tribunal under
The central government may set up a National Tribunal for
the ID Act and the corresponding State statutes. Labour
the adjudication of industrial disputes, which, in its opinion,
Courts and Industrial Tribunals are set up by the central
involve questions of national importance or are of such
government and the state government or the administrations
nature that industrial establishments in more than one state
of union territories for dealing with matters that fall in the
are likely to be interested in such disputes.
central and the state sphere, respectively.
One of the main factors that acts as a hurdle to the
It is open to the central government to refer a matter in relation
maintenance and promotion of industrial peace at present
to which it is the appropriate government to a Labour Court or
is the increasing resort to adjudication machinery in
an Industrial Tribunal constituted by the state government.
preference to voluntary arbitration and conciliation. A shift
Labour Courts deal with matters pertaining to the discharge is necessary towards collective bargaining that can work
and dismissal of workmen, application and interpretation of simultaneously with the statutory state machinery.
KEY TERMS
Board of Conciliation 279 Industrial Tribunals 282 National Tribunals 280
compulsory arbitration 284 labour courts 283 voluntary arbitration 284
conciliation officers 276
REVIEW QUESTIONS
1 What are the legal procedures available for the settlement of disadvantages of adjudication over conciliation and
disputes in India? voluntary arbitration?
2 Differentiate between the following: 5 Discuss the recommendations of the National Commission
on Labour with regard to the settlement of disputes.
i) Conciliation and arbitration
6 Explain schematically the complete machinery available for
ii) Voluntary arbitration and compulsory arbitration
the resolution of industrial conflicts. How effective, in your
3 When is a dispute referred to a National Tribunal? opinion, is the machinery? Give arguments in support of
your answer.
4 Why is adjudication preferred to conciliation or
arbitration? What could be the various advantages and

1 Despite the time delays in the settlement of disputes, why 2 The settlement machinery prescribed under the ID Act is no
do employers and unions resort to adjudication? Give longer relevant in the current fast-paced globally competitive
suggestions for reversing this trend. India. Elucidate.
D E B AT E
1 The utility of the statutory settlement machinery for indus- 2 Which is more important—equitable settlement or prompt
trial disputes prevails only in the industrial relations system. settlement?
The employee relations management system has no use for it.
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Changes in Shift Timings Or can it deal with it as a single problem? Explain your
answer.
Mrityunjay Sahay is the Regional Manager (HR), Northern
Region, for an FMCG company with its corporate office at 3. As per the Industrial Disputes Act, 1947, what should be the
Mumbai. The total employee strength of the company is role of the conciliation officer? Is he bound to intervene?
5,500, spread all over India. The Northern Region has 1,200
4. What role do you see for the “settlement machinery” in
employees spread over 6 Depot Offices located in Patiala,
resolving the dispute?
Gurgaon, Jaipur, Gwalior, Delhi and Kanpur. Each Depot
has around 150 employees. The Depots mostly comprise Legal or Illegal
warehouse operations, i.e., receipt, storage and dispatch of
You are the Regional Manager (South) of a company,
products. The Depots operate in two overlapping shifts. The
manufacturing and distributing mineral water. The manufacturing
Regional Operations Manager wants to introduce three shifts
units are located in Nanded and Nashik. The company has
working at the Depots without any addition of manpower.
warehouses in every major city of the country. Each warehouse
Each Depot has a recognized union. Mrityunjay finds it to
employs around 30–40 workmen. One morning, you got a call
be a daunting task. He has approached the unions, but has
from one of the warehouse managers, informing you that the
been warned by them not to press for change. Today, in his
local union has given a call for a flash strike, and the workers
morning correspondence, he has received a letter from the
have not been attending to duties since morning.
Patiala union, announcing their intention to go on a strike if the
management went ahead with the proposal to make changes Questions
in shift timings.
1. List down all the points systematically that you will check to
Questions determine whether the strike is legal or illegal.
1. Can the management introduce the proposed changes? How? 2. Can the management request the government for any help in
restoring “normalcy”?
2. Who will be the “appropriate government” in this case? Will
the management have to deal with each Depot separately?
NOTES
1 “Labour Legislation Guidelines”, Chapter IV, International 2 Report of the Second National Commission on Labour,
Labour Organization (http://www.ilo.org/public/english/ Government of India, 2002, para 23.12
dialogue/ifpdial/llg/noframes/ch4.htm#9).
SUGGESTED READING
Guidelines on Labour Legislation, ILO Publications, Geneva Venkatratnam, C. S., Industrial Relations (New Delhi: Oxford
(www.ilo.org). University Press, )
Report of the Second National Commission on Labour, International Labour Organization, Conciliation in Industrial
Government of India. Disputes: A Practical Guide, First Edition (Geneva: International
Labour Organization, 1988).
Monappa, Arun, Industrial Relations (:Tata Mcgraw-Hill
Publishing Limited, 1985).
M13_SING6013_01_C13.indd 293 6/15/10 3:38:11 PM

chapter fourteen
14.1 Harmonious Relations After reading this chapter, you will be able to:
14.2 A Framework of Preventive Measures • Identify the various institutions, processes
14.3 Ethical Code: Code of Discipline and systems for the prevention of industrial
14.4 Managing Discipline disputes
• Understand the role, genesis and working
of these institutions, processes and systems
National Joint Committee for the Steel Industry
The National Joint Committee (for the Steel Industry, NJCS) was constituted in pursuance of the decision taken in the sec-
ond session of the Industrial Committee on Iron and Steel in October 1969. This Committee arrived at a Memorandum of
Agreement on revision of wages and benefits in the steel industry on 27 October 1970. It covered the workers of the then
Hindustan Steel Ltd, Tata Iron and Steel Co. (TISCO)—a private sector company, Indian Iron and Steel Co. (IISCO) and
the then MISL, now Visvesvaraya Iron and Steel Plant (VISP). The Committee was formed under the aegis of the labour
ministry and the then Deputy Chief Labour Commissioner (I) was the Secretary of the Committee.
In February 1971, it was decided that this Committee would continue its work independently without any assistance from
the labour ministry and the Committee would raise its own funds including contribution from the workers’ representatives.
After signing of the first agreement in October 1970, the scope of the Committee was enlarged with a view to deal with the
implementation of the agreement, and also the problems of general nature affecting the industry as a whole. Since then, the
Committee has notched many milestones.
The NJCS decides and finalizes its own Terms of Reference. The scope of working of the Committee has been widened from
time to time and now covers:
i) Negotiations for wage settlement and its implementation

ii) Matters pertaining to and steps to be taken for the increase in production, productivity
iii) Improvement in quality, reduction of cost and wastages, etc.
iv) Review of welfare amenities and facilities
v) Matters/issues demanding immediate attention of the government
vi) Any other matter pertaining to the steel industry and its employees, as may be agreed to in the NJCS, from time to
time
The NJCS has now been working for 38 years and has concluded many industry-wide agreements on wide-ranging issues.
It is a permanent body and the process of discussion is continuous. It is certain that this bipartite forum for discussion
has prevented many a dispute in the industry from turning into dysfunctional conflict affecting the industry and the
employees.
M14_SING6013_01_C14.indd 294 6/15/10 3:41:48 PM

Industrial Disputes:
Institutional Framework
and Preventive Measures
The industrial relations system has, apart from mechanisms for settling industrial disputes, a number of insti-
tutions, legislations, systems and processes that help prevent disputes from arising. These measures act as an
interface between the parties amongst whom disputes may arise and also act as a safety mechanism.
The opening vignette describes the working of an industry-level bipartite forum where the repre-
sentatives of the management and the employees engage in continuous discussion on a wide range
of issues. The terms of reference are decided by both the parties, with an unstated aim to maintain
harmony in the industry. Many flashpoints, which could have otherwise led to conflict, dispute and
industrial action, are prevented due to the existence of a forum like NJCS, and a process of collective
bargaining and negotiations.
There exist many such institutions, processes, systems and even laws that contribute to the pre-
vention of industrial disputes.
14.1 Harmonious Relations

Howsoever much industrial harmony may be sought as an organizational objective, some conflict
is inherent in the industrial structure. Conflict of interests between the various groups can intensify
and prolong work stoppages. The three main groups in an industry, namely, owners, managers and
workers, develop different orientations and perceptions of their interests. The pursuit of divergent
objectives by each causes friction severe enough to, at times, lead to industrial action. A strategic,
proactive approach, which brings about some convergence of objectives, on a continuous basis, is
necessary to prevent the emergence of conflicts, even if they do arise.
Globalization is now a reality and has come to be reckoned by all sections of the society. The
accelerated economic growth witnessed in India today is attributed to the New Economic Policy pur-
sued by the government in the context of a global economic order. Harmonious industrial relations
are, therefore, more than ever, a pre-condition for competing. A review of data on work stoppages
arising out of industrial disputes reveals a significant improvement in industrial relations scenario
in the 1990s as compared to the 1980s. The number of industrial disputes, i.e., strikes and lockouts
have shown not only a declining trend but also a steep fall. It cannot be said with any certainty as to
the causes of the decline. Most likely, they are a complex interplay of many socio-economic-political
factors. Because there is a perceptible change in the figures pre- and post-NEP, this change in policy
itself appears to have definitely played a role in the decline of industrial disputes and industrial
actions. But these may not be the only reason.
14.2 A Framework of Preventive Measures

A comprehensive framework for industrial relations was presented in a diagrammatic form in Chapter
12 (see Fig. 12.1). The figure presented a clear division between the preventive and settlement aspects of
M14_SING6013_01_C14.indd 295 6/15/10 3:41:49 PM

Figure 14.1
The framework of Institutions/Fora Voluntary Codes Rules/Processes/Systems
preventive measures.
• International Labour • Code of discipline in • Standing orders
Organization industry • Discipline procedures
• Joint Consultative • Code of conduct • Grievance procedure
Tripartite Bodies (Indian • Code of efficiency and • Collective bargaining
Labour Conference, Standing welfare • Worker’s participation in
Labour Committee) management
• Industrial Committees, • Employee welfare
Wage Boards • Empowerment, engagement
• Bipartite Bodies training and education
• Joint Management Councils
• Works Committees
disputes. This division, however, is arbitrary and has been used merely to facilitate understanding
of the entire machinery. In real life, more often than not, the preventive and settlement measures
may interact with each other, operate simultaneously, or be common to both. For example, col-
lective bargaining, as a process, is useful both in preventing disputes and also settling disputes.
Let us make another arbitrary framework to understand all the preventive tools that
are in existence for the larger purpose of industrial harmony. These could be studied under
three broad heads: (1) Institutions/Bipartite and Tripartite Consultative Bodies (2) Voluntary
Codes and (3) Rules/Processes/Systems
Figure 14.1 presents this in a structured form. Please note that these measures are not
exhaustive, but cover the most significant of institutions/bodies/processes/systems/rules/
codes. A few of these components have been dealt with in detail in other chapters. A few
important ones (not all) that have not been covered elsewhere have been discussed below,
aalong with a refresher on those that have been.
Preamble to the ILO
Constitution
14.2.1 Institutions/Consultative Bodies
1
Universal and last-
ing peace can be A few of these institutions and bodies have been briefly discussed in Chapter 2. We will take
established only if it a look again, especially the objectives of their formation and the current concerns that they
is based upon social have for the maintenance of harmonious industrial relations.
h
justice
Conditions of labour
exist involving such O RI G I NS O F T H E I LO. The International Labour Organization was founded in
injustice, hardship the
t year 1919 in the aftermath of World War I (as a part of Treaty of Versailles, to end WW I).
and privation to large It
I was felt that lasting peace in the world was possible only if it was based on social justice.
numbers of people as ILO
I was formed at a time when the exploitation of labour was being felt, and talked about, as
to produce unrest so
a result of more than a century of industrialization. However, the need was not only humani-
great that the peace
and harmony of the tarian
t and social but also political and economic as there was a realization of economic inter-
world are imperilled; dependence
d of the world. The constitution of ILO was drafted by the Labour Commission set
an improvement of up
u by the Peace Conference, which first met in Paris and then in Versailles. The Commission,
those conditions is chaired
c by Samuel Gompers, head of the American Federation of Labour (AFL) in the United
urgently required
States,
S was composed of representatives from nine countries—Belgium, Cuba, Czechoslovakia,
The failure of any
France,
F Italy, Japan, Poland, the United Kingdom and the United States. It resulted in a tripar-
nation to adopt
humane condi- tite
t organization, the only one of its kind, bringing together representatives of governments,
tions of labour is an employers
e and workers in its executive bodies.1
obstacle in the way of The ILO, at present, has around 177 members. India was one of the founding members
other nations, which and
a its membership dates to the year 1919.
desire to improve the
conditions in their own
countries AIM S AND O BJ E CT I VE S O F T H E I LO.
A The intent for setting up of ILO are
best
b reflected in its Preamble to the Constitution:
M14_SING6013_01_C14.indd 296 6/15/10 3:41:50 PM

Industrial Disputes: Institutional Framework and Preventive Measures 297
“Whereas universal and lasting peace can be established only if it is based upon social
justice; and whereas conditions of labour exist involving such injustice, hardship and priva-
tion to large numbers of people as to produce unrest so great that the peace and harmony of
the world are imperilled; and an improvement of those conditions is urgently required; as, for
example, by the regulation of the hours of work including the establishment of a maximum
working day and week, the regulation of the labour supply, the prevention of unemploy-
ment, the provision of an adequate living wage, the protection of the worker against sickness,
disease and injury arising out of his employment, the protection of children, young persons
and women, provision for old age and injury, protection of the interests of workers when
employed in countries other than their own, recognition of the principle of equal remunera-
tion for work of equal value, recognition of the principle of freedom of association, the orga-
nization of vocational and technical education and other measures; whereas also the failure
of any nation to adopt humane conditions of labour is an obstacle in the way of other nations,
which desire to improve the conditions in their own countries.”2
The objectives of the ILO were further refined by way of a conference held in the year
1944 at Philadelphia. The outcome of the Philadelphia conference was later incorporated in
the Constitution of the ILO as The Philadelphia Declaration. The Philadelphia Declaration, The Philadelphia
Declaration
while reaffirming the founding principles of ILO, adds:
a) Labour is not a com-
a) Labour is not a commodity. modity;
b) Freedom of expression
b) Freedom of expression and of association are essential to sustained progress. and of association are
essential to sustained
c) Poverty anywhere constitutes a danger to prosperity everywhere.
progress;
d) The war against want requires to be carried on with unrelenting vigour within each c) Poverty anywhere
constitutes a danger to
nation, and by continuous and concerted international effort in which the represen-
prosperity everywhere;
tatives of workers and employers, enjoying equal status with those of governments, d) The war against want
join with them in free discussion and democratic decision with a view to the promo- requires to be carried
tion of the common welfare. on with unrelenting
vigour within each
Further, Part III of the Declaration, incorporated as the annexure to the Constitution, spells nation, and by con-
out the aims of ILO with clarity: tinuous and concerted
international effort . . .
a) Full employment and the raising of standards of living
b) The employment of workers in the occupations in which they can have the satisfac-
tion of giving the fullest measure of their skill and attainments and make their great-
est contribution to the common wellbeing
c) The provision, as a means to the attainment of this end and under adequate guaran-
tees for all concerned, of facilities for training and the transfer of labour, including
migration for employment and settlement
d) Policies in regard to wages and earnings, hours and other conditions of work, calcu-
lated to ensure a just share of the fruits of progress to all, and a minimum living wage
to all employed and in need of such protection
e) The effective recognition of the right of collective bargaining, the cooperation of
management and labour in the continuous improvement of productive efficiency,
and the collaboration of workers and employers in the preparation and application
of social and economic measures
f) The extension of social-security measures to provide a basic income to all in need of
such protection and comprehensive medical care
g) Adequate protection for the life and health of workers in all occupations
h) Provision for child welfare and maternity protection
i) The provision of adequate nutrition, housing and facilities for recreation and culture
j) The assurance of equality of educational and vocational opportunity3.
M14_SING6013_01_C14.indd 297 6/15/10 3:41:52 PM

Through adoption of various “conventions” and “recommendations”, the ILO has, over the
ILO’s Strategic Objectives
yyears, attempted to achieve the above aims. Over the years, a number of these conventions
Promote and realize have been ratified by the member states and recommendations implemented. The ILO now
h
standards and fundamen- articulates
a its “strategic objectives” as the following:
tal principles and rights
at work Promote and realize standards and fundamental principles and rights at work
Create greater opportuni- Create greater opportunities for women and men to secure decent employment and
ties for women and men
to secure decent employ- income
ment and income Enhance the coverage and effectiveness of social protection for all
Enhance the coverage
and effectiveness of social Strengthen tripartism and social dialogue
protection for all
Strengthen tripartism and
social dialogue
T HE ST R UCT UR E , T H E STANDAR D S AND T H E P R O C ES S ES AT
T HE I LO. The ILO, in trying to achieve its strategic objectives, brings together the three
parties
p to the social dialogue, namely, the government, employers and employees to set labour
standards and policies. The main instrument of these standards is the ILO “conventions” and
“recommendations”. In all, the deliberations of ILO, the employers’ and employees’ organiza-
tions have an equal voice with the government’s. This tripartism is what sets ILO apart from
all
a other global organizations. It is through tripartism and social dialogue within member
Tripartism nations
n that ILO helps design and implement policies within member states.
The interaction of govern- To understand the manner in which ILO goes about setting labour standards (which
ment, employers and essentially
e means “conventions” and “recommendations”), we must first know its structure.
workers (through their The main sub-systems in ILO are:
representatives) as equal
and independent partners The International Labour Conference
to seek solutions to issues
of common concern. The Governing Body
The International Labour Office
The International Labour Conference: This is the policy-making and legislative body of
Social Dialogue ILO.
I It is here that the conventions and recommendations are finally adopted. In the ILC,
Includes all types of each
e member state is represented by the government, the employers’ and the employees’ del-
negotiation, consulta- egates
e in the ratio of 2:1:1. The delegates may be accompanied by technical advisors. The
tion or exchange of rights
r for every delegate are the same, and there is freedom to express views and opinions,
information between or
amongst representatives of across
a the categories and member states. Therefore, it may so happen that delegates from the
governments, employers same
s member state may express opposing views or even that members from, say, the workers
and workers on issues of categories
c from different member states may express different views. Every delegate has vot-
common interest relating ing
i rights, and despite diversity of opinions, standards are set through majority opinion.
to economic and social The Conference, which is often called an international parliament of labour, has several
policy.
main
m tasks:
Debating, voting and adopting the standards in the form of conventions and recom-
mendations. The difference between conventions and recommendations has earlier
been explained in Chapter 2
Supervisions of the application of conventions and recommendations at the national
level
Examination of progress on status of the four fundamental rights, namely: (a) free-
dom of association and the effective recognition of the right to collective bargaining;
(b) the elimination of all forms of forced or compulsory labour; (c) the effective aboli-
tion of child labour; and (d) the elimination of discrimination in respect of employ-
ment and occupation
Discussion on issues of importance pertaining to social and labour matters. A report
on a central theme is presented by the Director General of the ILO, which is then
taken up for discussion. A few examples of such themes are:
M14_SING6013_01_C14.indd 298 6/15/10 3:41:52 PM

䊊 Social insurance and social protection (1993)

The ILO has three main
䊊 Defending values, promoting change: social justice in a global economy (1994) sub-systems:
䊊 Promoting employment (1995) 1. International Labour

Conference: This can
䊊 The ILO, standard-setting and globalization (1997) be equated to the
legislative arm of a
䊊 Decent work (1999), reducing the decent work deficit: a global challenge (2001) government
2. The Governing Body:
䊊 A fair globalization: creating opportunities for all (2004) This can be visualized
as the executive body
Passing of work programmes and budget 3. International Labour
The ILC meets every year in the month of June to transact business. International Labour Office: Is the perma-
nent secretariat
Conference, therefore, can be thought of an international parliament on labour issues. The
Conference elects one President and three vice-presidents (one representing each of the three
groups, namely, the government, the employers and the employees).
The Governing Body: The Governing Body is the executive body of the International
Labour Office (please note that International Labour Office is one of the sub-systems of the
International Labour Organization). The Governing Body oversees the functioning of the
International Labour Office, which may be thought of as the Secretariat of the International
Labour Organization. The Governing Body:
Decides the agenda of the International Labour Conference
Helps finalize the draft of Works Programme and Budget of the ILO for submission
to the ILC
Elects the Director-General (of the International Labour Office)
The Governing Body comprises 56 titular members and 66 deputy members. The titular mem-
bership is distributed in the ration of 2:1:1 (28 government, 14 employers and 14 employees).
Ten of these titular memberships are reserved for States of Chief Industrial Importance, which
presently comprise Brazil, China, France, Germany, India, Italy, Japan, the Russian Federation,
the United Kingdom and the United States. The other government members are elected by
the Conference every three years. The break-up of Deputy Members is—government = 24,
employers and employees = 19 each (24 + 19 + 19).
The Governing Body has a Chairperson and two vice-chairpersons. These are elected
positions with tenure of one year. The Chairperson is usually chosen from among the govern-
ment members. The Employer and Worker Vice-Chairpersons are chosen by their respective
groups. They can be re-elected in subsequent years.
The International Labour Office: The International Labour Office is the permanent secretariat
of the International Labour Organization. It is headed by a Director General, who also func-
tions as the Secretary General of the International Labour Conference. The Director General
is elected for a term of five years (renewable by the Governing Body). It functions under the
overall supervision of the Governing Body and does all the technical and administrative work
pertaining to the functioning of the ILO. The Director General or his Deputy is supposed to
attend all the meetings of the Governing Body. The headquarters of the International Labour
Office is at Geneva and has around 40 field and regional offices around the world.
Article 10 of the ILO Constitution lays down the roles and function of the International
Labour Office:
Collection and distribution of information on all subjects pertaining to industrial
life and labour and with particular reference to matters to be brought before the
International Labour Conference for adoption as a Convention
Prepare the documents on the various items of the agenda for the meetings of the
Conference
Provide assistance to the governments (on their requests) in framing of laws and
regulations on the basis of decisions in the Conference
M14_SING6013_01_C14.indd 299 6/15/10 3:41:53 PM

Figure 14.2
The structure of the ILO. The International Labour
Conference: Members in the Ratio
of 2:1:1 of Government,
Employers and Employees: 1
President + 3 Vice Presidents
(Legislative)
The Governing Body: 56 Titular Members

(28+14+14): 66 Deputy Members
(28+18+18): 1 Chairperson+ 2 Vice
Chairpersons: 10 of the Titular Members
from the countries of Chief Industrial Importance
(Executive)
Permanent Secretariat: Works under scrutiny and supervision

of the Governing Body: Headed by Director General: DG is also the
Secretary General for the ILC: Has a 5 year renewable term
(Secretariat)
Carry out the duties required of it by the provisions of the ILO Constitution in con-
nection with the effective observation of the Conventions
Publish, as per directions of the Governing Body may think, papers dealing with
problems of industry and employment of international interest
Figure 14.2 gives an overall picture of the sub-systems of the ILO.
Labour
L Standards: The ILO Thesaurus defines4 “labour standard” as “standards concerning
Labour Standards
employment
e and working conditions found acceptable by employers and workers through
Standards concerning collective
c bargaining and by the legislator through labour laws and regulations”. ILO stan-
employment and working dards
d take the form of ILO “conventions” and “recommendations”. Conventions and recom-
conditions found accept-
able by employers and mendations,
m thus, are the principal instruments for setting the labour standards.
workers through collective An issue of growing concern on labour or related issue is usually taken up for evolving
bargaining and by the as
a a labour standard (a convention or a recommendation or both). For example, the issue
legislator through labour of
o child labour could be an area of concern to be focused upon for arriving at an acceptable
laws and regulations standard.
s Developing an ILO standard is a legislative process. A flowchart describing the
process
p is shown in Figure 14.3.
Figure 14.3
The process for setting 2. Governing body puts 3. Office prepares law and
labour standards. topic on agenda of practice report with
1. An issue is identified
international labour questionnaire on content of
conference possible new instrument
4. Report sent to
governments, employees,
and workers for comments
Govern- Employer Worker

ment
5. Office analyses comments 7. Office prepares report with
and prepares proposed 6. First discussion of proposed summary of discussion and
conclusions conclusions at the conference draft instrument
M14_SING6013_01_C14.indd 300 6/15/10 3:41:53 PM

BOX 14.1 99TH SESSION (JUNE 2010) OF THE INTERNATIONAL

LABOUR CONFERENCE
AGENDA
Standing items
I (a) Reports of the Chairperson of the Governing Body and of the Director-General
(b) Global Report under the Follow-up to the ILO Declaration on Fundamental
Principles and Rights at Work*
II Programme and Budget and other questions
III Information and reports on the application of Conventions and Recommendations
Items placed on the agenda by the Conference or the Governing Body
IV Decent work for domestic workers (standard setting, with a view to the possible adop-
tion of a Convention supplemented by a Recommendation)
V Elaboration of an autonomous Recommendation on HIV/AIDS in the world of work
(standard setting, second discussion)
VI A discussion on the strategic objective of employment (first in the cycle of recurrent
discussions to follow up on the 2008 ILO Declaration on Social Justice for a Fair
Globalization)
VII Review of the follow-up to the 1998 ILO Declaration on Fundamental Principles and
Rights at Work.
*This year the Global Report will be on the effective abolition of child labour
Source: (http://www.ilo.org/wcmsp5/groups/public/–––ed_norm/–––relconf/documents/
meetingdocument/wcms_112359.pdf)
On being brought to notice, the Governing Body decides that the issue be put up to the
International Labour Conference for deliberations. An agenda is prepared for the ILC. A
sample agenda for the forthcoming meeting in June 2010 is reproduced in Box 14.1.
Next, the International Labour Office prepares a report basically incorporating
national laws and practices in the member states pertaining on the issue in focus mem-
ber. The consolidated report is then sent to all member states, the employers’ organiza-
tions and the employees’ organizations with a view to get their comments for discussion at
the International Labour Conference. This is followed by another report, incorporating all
views and discussions at the Conference and a draft instrument prepared (convention or a
recommendation) to be discussed in the next Conference. The draft is then amended and
adopted for action. Discussion on the issue twice in the Conference gives sufficient time for
the members to adequately study and discuss the same. A standard needs 2/3 rd majority
to be adopted.
Once adopted at the Conference, the member states need it to be submitted to their compe-
tent authority for ratification (the parliament in our case). Ratification makes it a legally binding
document and thereafter the member states have to create suitable legal provisions to enforce
the convention. Once ratified, the implementation comes onto the supervisory radar of the
ILO. Recommendations, on the other hand, are not legally binding. The ILO takes into account
the realities and, hence, there is enough flexibility in the conventions to allow for implementa-
tion suited to national socio-economic practicalities. Examine the issue presented in Box 14.2
to understand the practical constraints that nations face in ratifying a convention.
The ILO, thus, has been one of the most important and influential institutions in
enabling worldwide industrial peace. Through the spirit of tripartite consultation on
issues, evolving of labour standards, assistance in evolution of legal mechanisms, it has
been instrumental in the prevention of conditions leading to industrial strife. It has
evolved standards on every conceivable issue relating to labour and brought it up for
discussion and consensus. India, too, has benefited by way of being able to put in place
suitable labour laws.
M14_SING6013_01_C14.indd 301 6/15/10 3:42:27 PM


The general practice in India has been that it ratifies a convention only when the laws are
in place for the relevant convention. The government veers around to a position that is
prudent and the way for implementation of standards is gradual and progressive. Only
after sufficient progress has been made does India consider ratifying a convention after
which it becomes legally binding on the country. However, non-ratification of a convention
does not prevent it from voting for the said convention.
What are some of the major conventions that India has not ratified? Discuss the pos-
sible reasons for non-ratification.
L ABO UR STANDAR D S AND T R AD E /P R OT E C T I ON I S M. With the

advent of WTO, a debate has begun if trade sanctions could be used by the governments
against countries not adhering to “core” ILO standards namely, a) freedom of association
b) no forced labour c) no child labour, and d) no discrimination at work (including gender
discrimination). All WTO members are committed to the core standards. Does it mean that
WTO members could use trade sanctions in furtherance of the core standards? The develop-
ing countries have protested saying this argument to be arm-twisting the developing nations
who may have comparative advantage in trade because of cheaper labour. The WTO suc-
cinctly lists down the debatable issues between labour standards and trade5:
“Four broad questions have been raised inside and outside the WTO.
The analytical question: If a country has lower standards for labour rights, do its exports
gain an unfair advantage? Would this force all countries to lower their standards (the “race
to the bottom”)?
The response question: If there is a “race to the bottom”, should countries only trade with
those that have similar labour standards?
The question of rules: Should WTO rules explicitly allow governments to take trade action
as a means of putting pressure on other countries to comply?
The institutional question: Is the WTO the proper place to discuss and set rules on labour—or
to enforce them, including those of the ILO?
In addition, all these points have an underlying question: whether trade actions could
be used to impose labour standards or whether this would simply be an excuse for protec-
tionism.” These are all contentious issues, which have divided the developing and developed
nations. In fact, even the trade unions in these countries appear to be divided.
14.2.2 Joint Consultative Tripartite Bodies

The spirit of tripartism that ILO embodies has been incorporated at the national level too,
in the form of Indian Labour Conference and Standing Labour Committee. Both of these
are tripartite consultative bodies comprising members from the government (central and
state), employees’ organizations and employers’ organization. The two committees have been
discussed in Chapter 2. However, the experience with tripartism at the national level has not
been as successful as at the ILO, especially after the initial period of their formation. The ILC
was effective in its formative years, but in the 1950s, the effectiveness declined and it has been
downhill ever since. However, even though the meetings have declined in frequency and the
body is not fully representative due to fragmentations within each of the categories, the spirit
of tripartism has been persisted with, and matters of importance are still discussed, albeit
the results not as spectacular as in late 1940s and early 1950s. There are many reasons for the
shortcomings but, in the main, the reasons are:
i) The Government of India treat even the unanimous recommendations of ILC as
not binding on the government even though the government is represented in
the ILC. This undermined the confidence of the parties in the commitment of the
government.
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ii) It has become increasingly difficult to find a consensus on the representativeness of

members from the three parties, namely, the government, the employers’ organiza-
tions and the employees’ organizations.
iii) The major objective of bringing uniformity in labour legislation in the country has
not been completely achieved due to labour being in the Concurrent List on which
both the centre and a state could legislate.
THE EVO LUT IO N O F T RI PART I T E BO D I E S. The need for consultation on

labour matters on the patterns set by the ILO was recommended by the Whitley Commission
in 1931. It was recommended that the representatives of employers, labour and the govern-
ment should meet regularly in conference. The labour members should be elected by regis-
tered trade unions and employers’ representatives should be elected by their associations. The
recommendations could not be implemented till the Second World War, when cooperation
of labour was felt to be necessary to foster industrial peace and increase productivity for the
war effort.
During the inter-War period, the Government of India adopted a practice of hold-
ing consultations on important labour questions, principally those coming up before the
legislature or before the International Labour Conference, with the representatives of the
then provincial governments, employers and workers. These consultations were, how-
ever, held separately with representatives of each group. Accordingly, the Fourth Labour
Conference was held in August 1942. It set up permanent tripartite collaboration machin-
ery and constituted Preliminary Labour Conference (later named as the Indian Labour
Conference—ILC) and the Standing Labour Advisory Committee (which subsequently
dropped the word “Advisory” from its title SLC). Initially, the ILC consisted of 44 mem-
bers, whereas the SLC was about half the size of the ILC. The pattern of representation was
governed by:
i) Equality of representation between the government and the non-government
representatives Representation in ILC
i) Equality of repre-
ii) Parity between employers and workers sentation between
the government and
iii) Nomination of representatives of organized employers and labourers was left to the the non-government
concerned organizations representatives
ii) Parity between employ-
iv) Representation of certain interests (unorganized employers and unorganized workers and workers
ers), where necessary, on an ad hoc basis through nomination by the government. iii) Nomination of repre-
The delegates are free to bring one official and one non-official advisor with them. sentatives of organized
employers and labour-
The ILC was instituted to advise the Government of India on matters brought to its notice ers was left to the con-
by the government. In the earlier phase of the tripartite, SLC used to deliberate on its own cerned organizations
or over matters sent to it by ILC and the latter made the final recommendations. In course iv) Representation of cer-
of time, both the ILC and SLC have become deliberative bodies, the former being more tain interests (unorga-
nized employers and
representative. unorganized workers),
The agenda for ILC/SLC meetings was settled by the union labour ministry after taking where necessary,
into consideration the suggestions sent to it by member organizations. These two bodies worked on an ad hoc basis
with minimum procedural rules to facilitate free and fuller discussions among the members. through nomination by
The ILC was meant to meet once a year, whereas the SLC was to meet as and when necessary. the government. The
delegates are free to
The rules and procedures, which characterize the Indian tripartite consultative machin- bring one official and
ery, are largely in tune with the recommendations of the ILO Committee on consultation and one non-official advi-
cooperation. (Recommendation No. 113): sor with them.
i) Use of flexible procedures
ii) Calling a meeting only when necessary with adequate notice of the meeting and the
agenda
iii) Reference of certain items to working parties, if necessary
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iv) Dispensing with voting procedures in arriving at conclusions to facilitate

consultations
v) Maintaining records of discussions in detail and circulating the conclusions reached
to all participants
vi) Documentation of references
vii) Provision of an effective secretariat and a small representative steering grant in case
of more formal consultative machinery
Extracts from the deliberations of the 42nd Session of ILC (2009) are reproduced in the
Box 14.3.
BOX 14.3 INDIAN LABOUR CONFERENCE; 42ND SESSION; NEW DELHI; EXTRACTS
Conclusion of the Conference Committee on “All Issues connected with contractu-

alization of Labour” and “Issues related to Migrant Workers”
The Group recognized the need for preventing exploitation of contract labour wherever
it exists. There was a consensus that the issue required to be addressed on priority, espe-
cially in the wake of economic downturn. Hence, it was felt that the provisions relating to
Contract Labour (Regulation and Abolition) Act, 1970 need to be revisited in the context
of the following:
The Employers’ Group felt that the Contract Labour has come to stay. Hence, ban-
ning of contract labour does not provide solution to the problems relating to con-
tract labour. The inevitability of contract labour needs to be recognized. However,
fresh thought has to be given to the protection of working conditions of contract
labour. This protection mechanism needs to be clearly defined in the legislation
itself so as to ensure that the contract labour is not exploited in terms of appropri-
ate wages, working conditions and social security.
The Workers’ Group unanimously maintained that the Act should be amended to
provide for:
a) Absorption of contract employees in regular jobs after prohibition under
Section 10(2);
b) Insertion in the main Act provision for paying same wages and other benefits
for same and similar nature of work.
c) The ceiling of 20 workers should be deleted.
d) License should not be given for employment of contract labour in perennial
nature of jobs.
With a view to evolving a strategy paper incorporating amendments to the existing
legislation in the context of the views of respective groups, a task force be con-
stituted. Apart from experts, it should consist of representatives from Workers and
Employers so as to facilitate intensive interaction. However, this task force should
consult all the stakeholders and hold discussion with them. The Task Force should
submit its report in six months.
In the context of Inter-State Migrant Workmen (Regulation of Employment and Conditions
of Service) Act, 1979, on account of paucity of time, the group could not deliberate
at length. It was, however, felt that a tripartite group consisting of representatives from
employers, employees and the government should examine the provisions in the Act with
a view to facilitating greater social protection to the migrant workers and suggest amend-
ments within six months. In the meanwhile, all efforts should be made for effective imple-
mentation of existing provisions.
Excerpted from http://labour.nic.in/lc/42ilc/RecordNoteofDiscussions.pdf.
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THE EVALUAT IO N O F ILC AND SLC . According to the National Commis-

sion on Labour (1969), these two bodies have immensely contributed to attainment of the
objectives set before them. It observed: “The ILC/SLC have facilitated the enactment of cen-
tral legislation on various subjects to be made applicable to all the states and union territories
in order to promote uniformity in labour legislation. Tripartite deliberations helped to reach
a consensus on statutory minimum wage fixation (1944); introduction of a health insurance
scheme (1945); enactment of the Standing Employment Order Act, 1946; the Industrial Dis-
putes Act, 1947; enactment of the Minimum Wages Act, 1948; Dock Workers’ Regulation of
Employment Act, 1948; the Employees’ State Insurance Act, 1948; Provident Fund Scheme,
1950; the Mines Act, 1952; the Employees’ Provident Fund Act, 1952; and the making of leg-
islation concerning payment of bonus, regulation and abolition of contract labour, etc. The
tripartite deliberations also facilitated the formulation of comprehensive procedures for the
settlement of disputes under the Industrial Disputes Act, 1947. Both the inception of Labour
Appellate Tribunal in 1950 and its abolition in 1956 were the result of such deliberations.
The range of subjects discussed at the forums of ILC/SLC has been large and has included
social, economic and administrative matters concerning labour policy.” However, this obser-
vation was made in the 1960s and later analysis shows that the effectiveness of these bodies
in achieving the objectives set before them has steadily declined. Nevertheless, ILC and SLC
remain the main deliberative and consultative bodies for formulation of labour policy in the
country. Maybe, time has come for a fundamental shift in making the whole process more
relevant to today’s political, economic and social reality. Right now, the ILC and SLC appear
to be a relic of the past, more a wishful thinking of lofty ideals of tripartism rather than an
effective forum promoting social dialogue for policy formulation.
14.2.3 Industrial Committees

The establishment of industrial committees for specific industries was the outcome of the
1944 session of ILC. This committee was essentially tripartite with equal representation of
workers and employers. These committees were set up to consider special problems of the
industries for which they were constituted. Industrial committees came to be set up for plan-
tations, coal mining, cotton textiles, cement, tanneries, mines other than coal, iron and steel,
chemicals, building and construction, road transport, etc. To get a greater insight into the
nature and kind of work that these committees do, specimen reports of two such committees
set up for the steel and the oil industries is presented in the Box 14.4.
14.2.4 Bipartite Bodies

Two of the most important forms of bipartite bodies are the Works Committee and the Joint
Management Councils. Bipartite bodies were envisaged as bodies having equal represen-
tation from management and workers to foster discussion and collaboration on issues of
mutual interest in day-to-day running of the establishment. The idea for such bipartite bodies
has a very long history, stretching into 1920s and has an intuitive appeal. Indeed, the TISCO
and a few other progressive employers introduced the bipartite working long before its use
became widespread. Bipartite bodies, ideally, are consultative bodies where the parties have
an opportunity to discuss work-related issues on a continuous basis, thus preventing conflicts
from taking a dysfunctional form. They are not negotiating bodies and issues pertaining
to collective bargaining are to be scrupulously kept out of it. The importance of bipartite
consultation was recommended by the Royal Commission on Labour and also reiterated in
the Industrial Truce Resolution, 1947 and finally found place in the Industrial Disputes Act,
1948. It was further highlighted in both the First and Second Five Year Plan documents.
14.2.5 Works Committee

The ID Act, 1948 requires the employer to constitute a Works Committee consisting of
equal representatives of employers and workmen engaged in the establishment in industrial
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BOX 14.4 STUDY GROUP ON IRON & STEEL INDUSTRY
The Indian Labour Conference set up a study group on Iron and Steel Industry.
The group said that the industrial relations are more satisfactory in those plants:
I) “In which the recognized union is strong and is the only union with which man-
agement can negotiate matters of collective nature and which is in a position to
implement agreements arrived at and takes an objective view of the grievances of
employees;
II) Where the rules, regulations, procedures, practices have been either codi-
fied or established by convention and made known to the managerial staff and
employees;
III) Where a grievance procedure has been established and is used to settle griev-
ances by mutual discussion at different levels and where there is no desire to drag
in a third party for help;
IV) Where there is mutual respect and closer association of employers with manage-
ment at different levels, and where the personnel department is well developed.”
The group made the following recommendations for improvements in labour manage-
ment relations:
a) The union representing a majority of employees should be granted recognition;
b) Closer association should be developed between the management and the
employees at all levels in the plant;
c) Grievances should be redressed by mutual discussions;
d) To discuss matters relating to wages, conditions of service, leave, etc. it would be
useful if the recognized unions of all the steel plants are federated into one body;
e) Collective bargaining should be preferred both at plant and the industry levels and
adjudication should be resorted to when all other methods have failed;
f) A two-way communication system should be developed in the plant, for which
bipartite committees may be formed.
Study Group on Oil Industry
This group was set up by the Indian Labour Conference to study industrial relations in
the oil-refining and distribution industry. It came across some undesirable events, such as
“gheraos” of the management and stay-in strikes. These were held because of the political
influence of the unions, greater consciousness among the workers of their rights and delay
in decision making.
The group made the following recommendations:
i) Workers should be given a sympathetic treatment by the management;
ii) Collective bargaining should be developed;
iii) Workers should be educated to enable them to understand not only their rights but
obligations, too, towards the industry, management and the public;
iv) Adjudication should be resorted to only when negotiation, conciliation and volun-
tary arbitration have failed;
v) A suitable atmosphere should be created by the government by restricting strikes
and lockouts during the period when negotiations are continuing;
vi) Multiplicity of unions should go; and
vii) Mutual faith should be encouraged between the parties for promoting economy in
the industry regarding hours of work, overtime work and a weekly holiday
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establishments where 100 or more workmen are employed or have been employed on any
day in the preceding 12 months. The representatives of the workmen are to be chosen in
the prescribed manner from among the workmen engaged in the establishment and in con-
sultation with their trade union, if any, registered under the Indian Trade Unions Act, 1926
(16 of 1926). The Works Committee aims to promote and secure amity and good relations
between the employer and workmen and, to that end, to discuss matters of their common
concern and resolve differences of opinion. The functions that the Act visualized for the
Works Committees were:
To promote measures for securing and preserving amity and good relations between
employers and workmen
To that end, comment upon matters of common interest or concern
To endeavour to compose any material difference of opinion between the employer
and the workmen in respect of such matters
The Indian Labour Conference in its 17th session held in 1959 discussed the functions of the
works committee and approved a list of functions that could be assigned to the works com-
mittees and a list of functions that should not be assigned to the works committees. It will be
useful to look at the illustrative lists drawn up by the Indian Labour Conference.
Items that works committees, may normally deal with:
Conditions of work, such as ventilation, lighting, temperature and sanitation, includ-
ing lavatories and urinals
Amenities such as drinking water, canteens, dining rooms, crèches, rest rooms, medi-
cal and health services, protective equipment
Adjustment of festival and national holidays
Administration of welfare and funds
Educational and recreational activities such as, libraries, reading rooms, cinema
shows, sports, games, picnic parties, community welfare and celebrations
Promotion of thrift and savings
Implementation and review of decisions reached at meetings of works committees
Items that the works committees should not normally deal with
Wages and allowances
Bonus and profit-sharing schemes
Rationalization and matters connected with the fixation of workloads
Matters connected with the fixation of the standard labour force
Programmes of planning and development
Matters connected with retrenchment and lay-off
Victimization for trade-union activities
Provident fund, gratuity schemes and other retiring benefits
Quantum of leave, and national and festival holidays
Incentive schemes
Housing and transport service
According to a recent assessment, the system has proved its capacity to render substan-
tial help in composing differences between the parties, although, owing to lack of earnest
effort, the Committees are not functioning effectively in some units. The decision to
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demarcate the functions of works committees, as distinct from those of trade unions is
necessary for successful functioning of the committees. Works committees need to be
strengthened and made an active agency for the democratic administration of labour
matters.
14.2.6 Joint Management Councils

The Industrial Policy Resolution adopted by the government in 1956 declared that in a social-
ist democracy, labour was a partner in the common task of development, and should be asked
to participate in it with enthusiasm. A tripartite committee that visited the UK, Sweden,
France, Belgium, West Germany and Yugoslavia came to an agreement on the constitution,
functions and administration of joint councils. The committee recommended the setting up
of JMCs in all undertakings. An all-India seminar held in Delhi in 1957 worked out a model
agreement that the management and workers could enter into to set up these JMCs. The
scheme was to be voluntary and consultative in nature. Joint management councils were to
deal with all matters except matters falling within the area of collective bargaining such as
wages, bonus, hours of work, etc.
These Joint Management Councils were envisaged to provide a greater sense of partici-
pation and infuse a spirit of cooperation between workers and management. The continuous
interaction was supposed to keep friction and tension to a minimum level and create a coop-
erative atmosphere that facilitated negotiations.
The National Commission on Labour (1966–1969), which reviewed the working of
the JMCs, observed that there was not much support for the institutions of the JMCs. The
Commission held the view that “when the system of recognition of trade unions becomes
an accepted practice, both management and unions would themselves gravitate towards
greater cooperation and set up JMCs”. The tripartite committee, which approved the draft
model agreement regarding the establishment of JMC unanimously, agreed on the criteria
that should be followed in selecting the undertakings in which Joint Councils should be
established:
The undertaking should have well-established strong trade unions.
There should be willingness among the parties, viz. employers, and workers or the
unions to try out the experiment in a spirit of cooperation.
The size of the undertakings in terms of employment should be at least 500 workers.
The Committee further suggested that in choosing enterprises, the following criteria should
be kept in mind:
The employer in the private sector should be a member of one of the leading employ-
ers’ organizations. Likewise, the trade union should be affiliated to one of the central
federations.
The undertaking should have a fair record of industrial relations.
14.3 Ethical Code: Code of Discipline

A Code of Discipline in industry, which applies both to the public and to the private sector,
has been accepted voluntarily by all the central organizations of employers and workers and
has been in operation since the middle of 1958. The need for a code was felt in the light of the
fact that despite there being many legislations in place, industrial peace had not resulted to
the extent it was desired. The code was to be a voluntary agreement between employers and
employees to observe certain discipline that would contribute to industrial peace. The idea
had a moral appeal to all the parties concerned and a consensus emerged in the late 1950s
through deliberations in the 15th Session of the Indian Labour Conference (1957) to lay
down a few general principles, namely:
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No strike/lockout without notice

No unilateral action to be taken
No resort to go-slow tactics
No deliberate damage to property
No acts of violence, instigation, coercion, intimidation to be resorted to
Full utilization of dispute-resolution machinery
Speedy implementation of awards and settlements
These general principles were later discussed and evolved into a full fledged Code of
Discipline in Industry. And the code was accepted by the major trade unions and the employ-
ers’ organizations.
The “Code” has the following structure:
1. Part 1: Duties and responsibilities of the three parties
2. Part 2: Obligations common to management and unions
3. Part 3: Obligations of management
4. Part 4: Obligations of unions
The Code also lays down the criteria for “recognition” of a union as a representative body in
an enterprise and lists down the rights of a recognized union. It was hoped that by voluntary
acceptance of this Code, there would be a lasting industrial peace. However, the Code has lost
its relevance today in practical terms, even though the government had set up a mechanism
to monitor the implementation of the Code. Discuss the issue raised in Box 14.5.
14.3.1 Standing Orders

One of the most proactive measures to prevent an industrial conflict is setting up of clear
and satisfactory terms and conditions of employment. In this context, Standing Orders play a
significant role as it governs the rules and regulations that govern the conditions of employ-
ment of workers. The Standing Orders in one way specifies the duties and responsibilities
on the part of both employer and employees and makes each other clear of the expecta-
tions and the restrictions in terms of rules and procedures, which are standardized across
the organization.
The purpose of having Standing Orders at plant and unit level is to regulate industrial
relations. They define with sufficient precision the conditions of employment under the
employers, who are liable to make the said conditions known to the workers. These orders
regulate conditions of employment in terms of attendance, leave, hours of work, shift tim-
ings, grievances, misconduct, disciplinary action, etc. These are the very issues that have
the potential to escalate into industrial conflicts. The standardization of norms prevents
The Code of Discipline in Industry is now almost forgotten in practice, both by the trade
unions and the employers’ organizations. The attempt was more of moral exhortation
rather than a practical and enforceable code. The attempts at creating institutions and
instruments for preventive IR in India were mostly moralistic during the days when the
nation was being created. Unlike the evolution at ILO, the institutions and instruments in
India have not evolved with the changing times.
Do your own research to compare and contrast the preventive machinery in India with
those of ILO.
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ambiguity that can lead to misconceptions and raise issues of conflicting concerns. The pro-
visions of the Standing Orders have been explained in Chapter 10.
14.3.2 Grievance Procedure

A grievance is a sign of an employee’s discontentment with his job or his relationship with his
colleagues. Grievances generally arise out of the day-to-day working relations in an organiza-
tion. An employee or a trade union protests against an act or policy of the management that
they consider as violating employee’s rights.
Till the enactment of the Industrial Employment (Standing Orders) Act, 1946, the settle-
ment of day-to-day grievances of workers in India did not receive much attention. Clause
15 of the Model Standing Orders in the Schedule of the Industrial Employment (Standing
Orders) Act, 1946, specified that “all complaints arising out of the employment, including
those relating to unfair treatment and wrongful action on the part of the employer or his
agent, shall be submitted to the manager or other person specified on his behalf with the right
of appeal to the employer”.
The Industrial Disputes Act, 1947, through an amendment in 1982, provides for the
establishment of a Grievance Settlement Authority (9C) in all industrial establishments
employing 50 or more workmen. This, however, has not yet been given effect to.
Grievance procedure is a formal communication between an employee and the man-
agement designed for the settlement of a grievance. The grievance procedures differ from
organization to organization. An organization may follow either of the two policies: (1) open-
door policy or (2) step-ladder policy.
O P E N-D O O R P O LI CY. Under this policy, the aggrieved employee is free to meet
the top executives of the organization and get his grievances redressed. Such a policy works
well only in small organizations. However, in bigger organizations, top-management execu-
tives are usually busy with other concerned matters of the company. Moreover, it is believed
that the open-door policy is suitable for executives; operational employees may feel shy to go
to the top management.
ST E P-LAD D E R P O LI CY. Under this policy, the aggrieved employee has to follow
a step-by-step procedure for getting his grievance redressed. In this procedure, whenever an
employee is confronted with a grievance, he presents his problem to his immediate supervi-
sor. If the employee is not satisfied with the superior’s decision, then he discusses his griev-
ance with the departmental head. The departmental head discusses the problem with joint
grievance committees to find a solution. However, if the committee also fails to redress the
grievance, then it may be referred to chief executive. If the chief executive also fails to redress
the grievance, then such a grievance is referred to voluntary arbitration, where the award of
arbitrator is binding on both the parties.
G RI E VANC E P R O CE D UR E I N I ND I AN I ND UST R Y. The 15th Session of

the Indian Labour Conference held in 1957 emphasized the need of an established grievance
procedure for the country, which would be acceptable to unions as well as to management.
In the 16th Session of the Indian Labour Conference, a model for grievance procedure was
drawn up. This model helps in the creation of grievance machinery. According to it, workers’
representatives are to be elected for a department or their union is to nominate them. Man-
agement has to specify the persons in each department who are to be approached first and
the departmental heads who are supposed to be approached in the second step. The Model
Grievance Procedure specifies the details of all the steps that are to be followed while redress-
ing grievances (see Figure 14.4). These steps are:
Step 1: In the first step, the grievance is to be submitted to the departmental representative,
who is a representative of management. S/he has to give his answer within 48 hours.
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Figure 14.4
Aggrieved
The model grievance
employee
procedure.
Departmental
representative
Head of
department
Grievance
committee
48 hours
Chief executive
3 days
7 days
Voluntary
7 days arbitration
Settlement of grievance
Step 2: If the departmental representative fails to provide a solution, the aggrieved employee
can take his grievance to head of the department, who has to give his decision within
3 days.
Step 3: If the aggrieved employee is not satisfied with the decision of the departmental
head, s/he can take the grievance to the Grievance Committee. The Grievance Committee
makes its recommendations to the manager within seven days in the form of a report.
The final decision of the management on the report of Grievance Committee must be
communicated to the aggrieved employee within three days of the receipt of report. An
appeal for revision of the final decision can be made by the worker if s/he is not satis-
fied with it. The management must communicate its decision to the worker within seven
days.
Step 4: If the grievance still remains unsettled, the case may be referred to voluntary
arbitration.
14.3.3 Collective Bargaining

The ILO refers to collective bargaining as “all negotiations which take place between one
or more employers or employers’ organizations on the one hand, and one or more workers’
organizations on the other, for determining working conditions and terms of employment or
for regulating relations between employers and workers”.6
The collective bargaining, therefore, comprises:
Negotiations
Between organizations of workers and employers (it is not individual)
Subject matter is working conditions, terms of employment, relationship between
employers and employees
As the term suggests, “collective” means a group, i.e., it must involve a group of employees or
trade unions on their behalf who would “bargain” on behalf of the workers they represent.
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Since it is bargaining, the parties move to a position different from where they started through
negotiations and discussions. The term itself implies flexibility in the process. The fundamen-
tal assumption is that solution for mutual gain is possible through discussions and negotia-
tions, thus abjuring violence or precipitate action.
Collective bargaining is a process of joint decision-making that advocates industrial
democracy. It establishes a culture of bipartism and joint consultation in industry and an
involved adaptable method of adjustment to economic and technical changes in an industry.
It helps in establishing industrial peace without disrupting either the existing arrangements
or the production activities.
Collective bargaining is a means where both parties find ways for joint regulation
through mutual consent. As a term, “collective bargaining” is said to have been coined by
Sydney and Beatrice Webb. It emerged through a natural process of resolving industrial con-
flicts and growth of trade unions. Mahatma Gandhi guided a collective-bargaining process
in the textile mills of Ahmedabad in the 1920s.
ILO, in 1949, adopted a convention on “Right to Organize and Collective Bargaining”
(see Box 14.6). The right to collective bargaining is a fundamental right. The Indian
Constitution (Article 19c) also guarantees freedom of association as a fundamental right.
India, however, has still not ratified the ILO Convention on Collective Bargaining (C98). The
right to collective bargaining has not been extended to employees of the government whose
wages are determined through Pay Commissions and not through bargaining. However,
for the industry at large, the right to collectively bargain exists. An important precondition
for collective bargaining is the existence of strong and representative trade unions, duly
recognized by the management. The collective-bargaining process is weak in India because
of fragmentation of trade unions, and also the absence of legislation on a pan-India basis
making it mandatory to recognize a trade union. A representative union in a position will
have rights to bargain.
It is easy to see how strengthening the collective bargaining could go a long way in pre-
vention of industrial unrest.
T HE CO NCE P T O F CO LLE C T I VE BAR G AI NI NG. Collective bargaining,

as a concept, can be viewed from three perspectives—the “market” perspective, the “rule–
making” perspective and the “business” perspective. The market perspective views collec-
tive bargaining as the means by which labour is bought and sold in the marketplace. In this
context, collective bargaining is perceived as an economic and an exchange relationship. This
concept focuses on the substantive content of collective agreements, i.e., on the pay, hours
of work, and fringe benefits, which are mutually agreed between employers and trade-union
representatives on behalf of their members.
The “rule–making” perspective, on the other hand, regards collective bargaining as an
institutional system or rule-making process, which determines the relation between manage-
ment and trade-union representatives. Here, collective bargaining is seen as a political and
power relationship.
The “business” or “employee relations” perspective of collective bargaining views the
institution as a participative decision-making between the employees and employers, on
matters in which both parties have vital interests.
In collective bargaining, the employer does not deal with workers directly, but he
deals with a collective authorized institution. It can be thought of as an institutional
mechanism for:
a) Fixing up the price of labour services
b) Establishing a system of industrial jurisprudence
c) Providing a machinery for the representation of individual and group interests
CO ND I T I O NS F O R T H E SUC C E SS O F CO LLE C T I V E B A R GA I N I N G.
The success of collective bargaining depends upon the following factors:
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BOX 14.6 CONVENTION 98: RIGHT TO ORGANISE AND COLLECTIVE

BARGAINING CONVENTION, 1949
Article 1
1. Workers shall enjoy adequate protection against acts of anti-union discrimination
in respect of their employment.
2. Such protection shall apply more particularly in respect of acts calculated to—
(a) make the employment of a worker subject to the condition that he shall not
join a union or shall relinquish trade union membership;
(b) cause the dismissal of or otherwise prejudice a worker by reason of union
membership or because of participation in union activities outside working
hours or, with the consent of the employer, within working hours.
Article 2
1. Workers’ and employers’ organisations shall enjoy adequate protection against
any acts of interference by each other or each other’s agents or members in their
establishment, functioning or administration.
2. In particular, acts which are designed to promote the establishment of workers’
organisations under the domination of employers or employers’ organisations, or
to support workers’ organisations by financial or other means, with the object of
placing such organisations under the control of employers or employers’ organisa-
tions, shall be deemed to constitute acts of interference within the meaning of this
Article.
Article 3
Machinery appropriate to national conditions shall be established, where necessary, for the
purpose of ensuring respect for the right to organise as defined in the preceding Articles.
Article 4
Measures appropriate to national conditions shall be taken, where necessary, to encourage
and promote the full development and utilisation of machinery for voluntary negotiation
between employers or employers’ organisations and workers’ organisations, with a view to
the regulation of terms and conditions of employment by means of collective agreements.
Article 5
1. The extent to which the guarantees provided for in this Convention shall apply to the
armed forces and the police shall be determined by national laws or regulations.
2. In accordance with the principle set forth in paragraph 8 of Article 19 of the
Constitution of the International Labour Organisation the ratification of this
Convention by any Member shall not be deemed to affect any existing law, award,
custom or agreement in virtue of which members of the armed forces or the police
enjoy any right guaranteed by this Convention.
Article 6
This Convention does not deal with the position of public servants engaged in the adminis-
tration of the State, nor shall it be construed as prejudicing their rights or status in any way.
Source: http://www.ilo.org/ilolex/english/convdisp1.htm.
i) The union participating in the collective-bargaining process must be strong, demo-

cratic and enlightened. The weak and fragmented state of the unions, smallness and
instability of their membership, rivalries, company-formed and dominated trade
unions are some of the reasons for the undeveloped state of collective bargaining.
Collective bargaining cannot become fully effective, if management continues to
regard the union as an alien, outside force.
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ii) One of the principles for establishing and promoting collective bargaining is to give
voluntary recognition to trade unions as one of the contracting parties. It may also have
the positive benefit of improving industrial relations, production and productivity.
iii) There should be willingness to give and take by both the parties, and genuine inter-
est on the part of both to reach an agreement and to make collective bargaining
work. The trade unions should refrain from putting forward exaggerated demands.
Both the parties must realize that collective-bargaining negotiations are, by their
very nature, a part of the compromise process. An emphasis on accommodation
rather than conflict is necessary.
iv) The whole atmosphere of collective bargaining gets vitiated, relations become bit-
ter and strained and negotiations more difficult, if one or both the parties engage
in unfair practices. Both the union and the management, therefore, must desist
from committing unfair practices and must have a healthy regard for their mutual
rights and responsibilities. Trust and openness are very essential for meaningful
discussion.
v) Collective bargaining usually takes place when there are differences between the
parties on certain issues. But in order to make the collective-bargaining process
more successful, it is essential on the part of the representative of employers and
unions to hold meetings at regular intervals to consider matters of common inter-
est. Such an on-going process would enable them to understand one another’s
problems better and make it easier to find solutions to questions on which their
interests conflict.
vi) Effective collective bargaining presupposes an intelligent understanding of both

management and union of the needs, aspirations, objectives and problems of
the other party. Union leaders must have full knowledge of the economics of the
plant or the industry concerned. Management must have a developed aware-
ness of the nature of the union as a political institution operating in an economic
environment.
vii) The effectiveness of collective bargaining cannot be attained without maturity of

leadership on both sides of the bargaining table. The negotiators should have such
qualities as experience, skill, intelligence, resourcefulness, honesty and technical
know-how. They must have the capacity to distinguish between basically important
and trivial issues. They must know when it is wise or necessary to compromise and
when it may be fatal to concede to the demands.
viii) Intelligent collective bargaining demands specialized training. The increasingly

technical complexity of the collective-bargaining agenda requires expert profes-
sional advice, experience and skill on the part of the negotiators.
ix) Both management and the union often find it difficult to locate the men on the
other side of the table, who are authorized to negotiate. For proper negotiations, it
is necessary to know the persons empowered to act for the company and the union
respectively.
14.4 Managing Discipline

Organization discipline is concerned with standards of attitudes, behaviour and performance.
It is derived from the total approach to ER that is adopted, especially from the perspective,
culture and behaviour of the organization as a whole and the style of operations management
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adopted. It is developed, and the effectiveness of operations and actions in the field of orga-
nization discipline are reflected in the priority and quality of management and supervisory
staff training in the field, as well as the extent, nature and frequency of issues concerning
disciplinary actions and grievances raised.
Effective organization discipline, therefore, reflects the strategic approach and the style
of ER adopted in its pursuit. Specific policy issues can then be addressed under the headings
of attitudes and behaviour and performance. The direction and management of organization
discipline is devised and defined by senior managers, operated by those with departmental,
divisional and functional responsibilities, and accepted by all those who work in and for the
organization. Operationally, it is a process with two key factors:
Discipline—strategies and activities for the maintenance of standards and remedial
action where necessary
Grievances—strategies that enable employees to raise questions, issues and problems
with the organization, so that these may be resolved
It is, therefore, necessary to consider organization discipline from the point of view of:
The stated or explicit—the ways that rules and regulations are laid down, stated
standards and levels of performance, the content of discipline and grievance proce-
dures are documented and communicated to employees
The actual—the ways in which the rules are applied in practice, standards and levels
of performance are valued, monitored and maintained, and discipline and grievance
procedures are applied
The implicit—wider considerations, especially the aura of ER, and whether this is
positive or negative, based on harmony and progress, or fear and conflict
14.4.1 Disciplinary Procedures

To understand the disciplinary procedure, we must first understand what “indiscipline” is.
Indiscipline can best be understood in its context. Indiscipline has not been defined any-
where, though an absence of discipline has often been referred to as indiscipline!
IND ISCIP L INE . All disciplinary procedures must state the circumstances in which
they become applicable. Different contexts in which indiscipline may be considered are:
1. Performance-related: This requires a clear statement by the manager or supervisor
of where and why the performance is falling short, followed by another clear state-
ment of reasons attributing to it. This is then subject to regular monitoring, evalua-
tion and review and is concluded with a clear statement to the employee that either
performance is now satisfactory or performance is still unsatisfactory, in which case,
further action is to be taken. Care must be taken to consider the skill and motivation
aspects of performance gaps.
2. Misconduct: Misconduct includes workplace issues and misdemeanours. Misconduct
has not been defined in any law or rule books, although most organizations list down
an elaborate description of the acts and behaviours that may be construed to be mis-
conduct. Misconducts may include negligence, unacceptable behaviour, failure to
follow procedures, failure to act in the organization’s best interests, insubordination,
rudeness to colleagues and bad time-keeping. It may include persistent absenteeism
(although very great care is to be taken to keep documents available for scrutiny).
Misconduct may also include victimization, bullying and harassment.
3. Attitudes and Demeanour: Attitudes and demeanour are harder to pin down. It is,
however, quite legitimate both to make provision for dealing with negative, poor and
sloppy attitudes and also those where individuals place their own priorities above
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those of the organization. Other matters include attitudes to others—for example,

where someone engages in a constant or persistent attitude of blame or denigration
towards others.
CL A R I F YI NG M I SC O ND UCT: G R O SS AND SE VE R E O R MI N O R .
The law requires organizations to have and make known to staff what constitutes serious
and gross misconduct. The usual form of presentation of this is a list. This list need not be
exhaustive. It should give clear and wide-ranging examples. The usual matters covered under
this heading are:
Theft, fraud, sale of confidential information, other dishonesty
Vandalism, violence, attacks on staff, equipment and premises
Sexual misconduct
Serious or gross negligence and inattention to duties and the organization’s
interests
Using foul and abusive language, swearing in front of customers and clients
Dishonesty in dealings with staff, customers, clients and the public
Failure to follow safety procedures, endangering life and/or equipment
Serious and gross misconduct may also arise as the result of persistent misconduct. This
includes persistently bad time-keeping, persistent absenteeism, persistent insubordination
and rudeness.
All organizations have their own interpretation and variations; there may also be specific
operational requirements underpinned by instant recourse to gross misconduct.
F O LLO W P R I NCI P LE S O F NAT UR AL J UST I CE . All disciplinary proce-

dures, and the activities that they support, must include the following rights:
The right of the individual to know the case against him/her and to confront the
accuser
The right of the individual to respond to the case and present his/her own point of
view
The right to representation at each stage, either by the representative of a recognized
trade union or any other person of the individual’s choice
The right to receive in writing a definitive statement of the conclusion and outcome
of the case at each stage
The right of appeal against the conclusion and the outcome at each stage
P RO CE D UR E
Step 1. Warnings: Minimum standards require of at least two warnings (and many organiza-
tions have three or four). These may either be written or oral; when oral, they are normally
confirmed in writing. The general aim is to ensure that the employee is aware that an aspect
of their conduct, behaviour or performance is unacceptable and giving cause for concern.
The warning must confirm this and state the remedial action that is necessary.
For poor performance, this normally includes a restatement of the standards of activity
that are necessary and acceptable. For shortfalls in behaviour and conduct, this normally
includes a restatement of what the required standard are and why they are necessary. For
both performance and conduct, warnings will normally include a date in the future on which
a review of progress is to be carried out.
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Step 2. Recording Outcome of Warning: Warnings are recorded on the individual’s per-
sonnel file (or equivalent) for set periods of time. Time periods are stated in the procedure
and notified to the individual in each case. It is normal for warnings for minor offences to
be kept on file for periods of between three months and two years. Records of more serious
offences may be retained for longer periods. The most serious offences are kept on file for
life. There are no rules governing this. The only requirement is to be fair and reasonable.
The organization must balance its need to set and maintain standards with the requirement
of individuals not to have their career or their prospects irreparably harmed by relatively
minor incidents.
Step 3. Show-Cause Notice for Serious Misconduct: For matters of serious misconduct, it
is acceptable and legitimate to issue a show-cause notice. This is confirmed to the individual
in writing and stated clearly that in case he fails to show causes for his/her misconduct, dis-
ciplinary action would be initiated against him/her. Organizations must indicate the kind of
offences that constitute serious misconduct (although the list need not be exhaustive). These
normally include persistently bad time-keeping, persistently poor performance, rudeness
and insubordination.
For gross misconduct, it is acceptable and legitimate to move straight to suspension.
Organizations must again indicate the kind of offences that constitute gross misconduct
(although the list, again, need not be exhaustive). These normally include vandalism, vio-
lence, arson, sabotage, theft, dishonesty, sexual misconduct, sale and publication of confi-
dential information, other breaches of the criminal law and harassment, persecution and
victimization of members of staff.
Step 4. Issue of Charge Sheet and Constitution of Inquiry Committee: A charge sheet list-
ing out the charges with reference to the clause under which it is termed “misconduct” along
with any documents to support the charges are issued in writing to the employee with due
receipt acknowledgement obtained. Disciplinary authority (not less than appointing author-
ity) constitutes an Inquiry and appoints an inquiry officer and presiding officer to defend the
case on behalf of management.
Step 5. Disciplinary Hearings: For all disciplinary hearings, employees must be informed
of the following:
They must be notified, either orally or in writing, that they are required to attend a
disciplinary hearing. The words “disciplinary hearing” must be used. They must be
informed of all the rights indicated above, including the rights to be accompanied
and represented.
They must be informed of the case against them, who has brought it and why. They
must be given the opportunity to face their accuser. They must be informed of the
nature of the case, whether it potentially constitutes a minor offence, repeat offence,
serious misconduct or gross misconduct.
They must be asked to give their explanation of the events and situation.
They must be allowed time (but not to excess) to prepare their case. They must be allowed
to call witnesses and gain access to documents and papers that affect their case.
Procedures must be operated as follows, whatever the level of misconduct alleged and what-
ever the stage that is being used:
Individuals facing discipline by their organizations must be allowed representation.
Where a trade union is recognized, and where the individual is a member, representa-
tion is normally through that union. Where there is no union or where the employee
is not a member, they may be accompanied by a colleague of their choice. This must
always be allowed.
Individuals must always be told that they are facing discipline in advance of the hear-
ing. This notification may give an indication of the range of outcomes. It must never
prejudge the issue.
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Individuals facing discipline are entitled to hear the charges against them and to face
their accuser/accusers in person. They are entitled to respond to the charges and to
call witnesses and evidence in support of their case.
Individuals who have been disciplined must be afforded the opportunity to appeal.
They must be notified of the person/official to whom the appeal should be made, and
the deadline by which it should be made.
Individuals facing discipline must be notified in writing of the outcome of the case. A
copy of this should be placed in their personal file. When a warning is issued, a copy
of this should be given to the employee, and a copy placed on his/her file. This applies
to both oral and written warnings. It should state what the warnings were for, any
remedial action necessary, what is to happen if there is any repeat and how long it is
to remain current.
SUMMARY
A strategic proactive approach that brings about some 䊊 To that end, comment upon matters of common interest
convergence of objectives is necessary to prevent the emer- or concern
gence of conflicts, and if they do arise, a method needs to
䊊 To endeavour to compose any material difference of
be devised to avoid an escalation that can affect morale and
opinion between the employer and the workmen in
productivity of the workforce.
respect of such matters
The declining trends in industrial action have generally been
An all-India Seminar held in Delhi in 1957 worked out a
attributed to the preventive steps taken by employers to
model agreement that the management and workers could
reduce conflicts at the workplace. The preventive machinery
enter into to set up these JMCs. The scheme was to be volun-
of the government has also played a significant role in this
tary and consultative in nature. Joint management councils
regard.
were to deal with all matters except matters falling within the
The preventive machinery includes the following: area of collective bargaining such as wages, bonus and hours
of work.
䊊 Tripartite and Bipartite Consultative Bodies, Voluntary
Codes and Systems/Processes One of the most proactive measures to prevent an industrial
conflict is setting up of clear and satisfactory terms and con-
䊊 ILO is the ultimate tripartite body that has the aim of
ditions of employment. In this context, Standing Orders play
laying down the labour standards through tripartism and
a significant role as it governs the rules and regulations that
social dialogue
govern the conditions of employment of workers.
䊊 Joint consultative tripartite and bipartite bodies
Grievance procedure is a formal communication between an
like ILC, SLC, Industrial Committees and Central
employee and the management designed for the settlement
Implementation and Evaluation Committees are
of a grievance. The grievance procedures differ from orga-
the tripartite bodies at the national level shaping
nization to organization. A model grievance procedure has
the policy and encouraging consultation amongst
been recommended.
partners.
A Code of Discipline in Industry, which applies both to
䊊 Code of Discipline in Industry is a voluntary measure
the public and to the private sector, has been accepted vol-
from the partners to ensure industrial peace.
untarily by all the central organizations of employers and
䊊 The ID Act, 1948 requires the employer to constitute a workers and has been in operation since the middle of 1958.
Works Committee consisting of equal representatives of The Code lays down specific obligations for the management
employers and workmen engaged in the establishment in and the workers with the object of promoting construc-
industrial establishments where 100 or more workmen tive cooperation between their representatives at all levels,
are employed. avoiding stoppages as well as litigation, securing settlement
of disputes and grievances by mutual negotiations, concili-
The functions that the Act visualized for the Works
ation and voluntary arbitration, facilitating the free growth
Committees were:
of trade unions and eliminating all forms of coercion and
䊊 To promote measures for securing and preserving amity violence in industrial relations.
and good relations between employers and workmen
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Collective bargaining is a process of joint decision-making and technical changes in an industry. It helps in establish-
that advocates industrial democracy. It establishes a cul- ing industrial peace without disrupting either the existing
ture of bipartism and joint consultation in industry and arrangements or the production activities.
an involved adaptable method of adjustment to economic
KEY TERMS
bipartite bodies 305 labour standards 298 step-ladder policy 310
code of discipline 308 natural justice 316 the Philadelphia declaration 297
collective bargaining 295 open-door policy 310 tripartism 298
indiscipline 315 protectionism 302 Works Committee 305
Joint Management Council 308 social dialogue 298
REVIEW QUESTIONS
1 Give an overview of the preventive measures that are in 6 What is collective bargaining? What are the matters that can
place to ensure that industrial peace is maintained. be taken up for collective bargaining?
2 Describe the structure of ILO. 7 Critically examine the various theories of collective
bargaining.
3 What are labour standards? What is the process involved in
establishing a labour standard? 8 Schematically explain the Model Grievance Procedure.
Do you think it is of any value in the era of computers and
4 Describe in detail the overall preventive measures, sys-
intranet? Suggest an alternative grievance procedure for a
tems, and structure that has been put in place to ensure
modern business organization.
that a healthy climate of relationships prevail in the Indian
industry. 9 Employee relations management is just another name for
proactive concepts like employee involvement and employee
5 Describe in detail the structure, objectives and performance
engagement. Do you agree?
of the ILC and the SLC. Is it right to say that the SLC is a
mere Secretariat of the ILC? Why or why not?

1 Critically examine the contributions and shortcomings of Discipline to find out the manner in which it has ceased
of various tripartite bodies in the prevention of industrial to be effective? What could be the reasons for its decline as a
conflicts. In the light of fundamental changes in the working moral force in industrial relations?
of industry since 1991, how do you think the institutions can
3 Do the government employees in India have the right for
be strengthened?
collective bargaining? From where does the right to collec-
2 How effective has the Code of Discipline been in preventing tive bargaining come to the employees in India?
industrial conflict? Please do a survey of literature on Code
D E B AT E
1 The preventive measures for maintaining IR is only a set of 3 The WTO, under the garb of providing a level playing field,
good intentions. The actual maintenance of industrial rela- is using labour standards to negate the comparative advan-
tions is situational. tage of developing nations.
2 The settlement machinery has proved to be far more effec-

tive in maintaining industrial peace rather than the utopian
“preventive measures”.
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Union Problems at Alloy Steel Plants A partner network of around 200 unions and NGOs in
garment-producing countries, CCC attempts to iden-
Alloy Steels Plant is a manufacturer of different grades of
tify local problems and objectives, and to help develop
special steels. The annual capacity is 100,000 MT per annum.
campaign strategies to support workers in achieving their
The total employee strength in the plant is around 7,000.
goals.
The plant is located in a state where the trade-union activity
is very vigorous. The ASP has had a history of labour strife for CCC claims to base its campaign on the principles that
the past four to five years. It has three very strong unions and “all workers—regardless of sex, age, country of origin,
the management is really hard pressed to arrive at a consen- legal status, employment status or location, or any other
sus with the three unions, even though one of these unions basis—have a right to good and safe working conditions,
is the recognized union. Every issue relating to production where they can exercise their fundamental rights to associ-
and productivity is linked by the union to either the terms of ate freely and bargain collectively, and earn a living wage,
employment or the economic issues. Management wanted to which allows them to live in dignity”. It believes that mini-
separate the two issues (operational and employment related). mum standards related to these rights are derived from
As per the ID Act, 1947, a Works Committee has been consti- the ILO conventions, the ILO Declaration on Fundamental
tuted with representatives from the workmen and the manage- Principles and Rights at Work adopted in 1998, as well as
ment. The subject matters for discussion are all the issues that on the Article.
are not covered by the collective bargaining. However, invari-
The CCC pressures retailers and manufacturers to adopt the
ably, the discussions veer off to discussing matters like deploy-
Code of Labour Practices and ensure that the principles are
ment, overtime payments, disciplinary issues and inter-union
upheld. It lobbies governments to be responsible consumers
issues. Management, despite numerous attempts to focus
themselves by committing to the ethical procurement of govern-
completely on production issues, finds itself to be in a position
ment uniforms and workwear.
of helplessness, due to the strength of the unions.
Questions: Questions
1. Can you suggest a concrete way in which management can 1. The national governments of the garment-exporting
tackle the separation of the two issues? countries allege that campaigns like CCC are merely a
pressure group of interested parties (trade unions and
2. Why do you think this is happening at ASP?
governments in Europe and other developed nations) bent
Clean Clothes Campaign upon lowering the comparative advantage of the developing
countries, which they enjoy because of lower labour costs.
The Clean Clothes Campaign (CCC) is the garment industry’s Do your own research on this to bring out a balanced
alliance of labour unions and non-governmental organizations. report on labour standards and comparative advantage in
Started in 1989, this alliance comprises unions and NGOs developing countries.
from 13 European nations.
2. What position should the ILO take to see that in
The Clean Clothes Campaign educates and mobilizes consum- implementing the standards, there is a consensus rather than
ers, lobbies companies and governments, and offers direct branding clothes from a few countries as “unclean” because
solidarity support to workers as they fight for their rights and of violation of standards?
demand better working conditions.
NOTES
1 “About the History—Origins of ILO”, http://www.ilo.org/global/ 5 UNDERSTANDING THE WTO: CROSS-CUTTING
About_the_ILO/Origins_and_history/lang--en/index.htm. AND NEW ISSUES - Labour standards: consensus,
coherence and controversy (http://www.wto.org/english/
2 The Preamble, The Constitution of ILO, http://www.ilo.org/
thewto_e/whatis_e/tif_e/bey5_e.htm).
ilolex/english/constq.htm.
6 ILO, ILO Thesauru, (Geneva: Bureau of Information and
3 Constitution of the ILO, http://www.ilo.org/ilolex/english/
Library Services, 2005), (http://www.ilo.org/public/libdoc/
constq.htm.
ILO-Thesaurus/english/tr1009.htm).
4 ILO, ILO Thesaurus, s.v. “labour standard, “ (Geneva: ILO,
2005), available at http://www.ilo.org/public/libdoc/ILO-
Thesaurus/english/tr4113.htm)
M14_SING6013_01_C14.indd 320 6/15/10 3:42:36 PM

SUGGESTED READING
1 Mamoria, Mamoria and Gankar, Dynamics of Industrial 3 National Commission on Labour (1969), Government of
Relations, 15th Edition (Mumbai: Himalaya Publishing India, New Delhi.
House, 1983).
4 Venkatratnam, C. S., Industrial Relations, (New Delhi:
2 Mathur, K. and N. R. Sheth, Tripartism in Labour Policy: The Oxford University Press, 2006).
Indian Experience (New Delhi: Shriram Center for IR, 2006).
M14_SING6013_01_C14.indd 321 6/15/10 3:42:37 PM

chapter fifteen
15.1 The Context and Concepts of Wage After going through this chapter, you will be
15.2 The Evolution of Wage Administration in able to:
India • Understand the concepts of minimum wage,
15.3 Components and Determinants of Wage fair wage and living wage
15.4 Wage Structure • Trace the evolution of wage administration
15.5 Towards a Wage Policy in India
• Schematically understand the dynamics of
various internal and external factors in the
determination of wages
• Know the various methods that are
employed for wage determination in India
• Appreciate the challenges faced in evolving
a national wage policy
The Power Project

Manohar Satpathy, the newly appointed General Manager (HR) for a green-field power project in Jharkhand, has been
charged with the responsibility of, amongst other things, designing a wage structure for the employees that will eventually
be recruited and positioned at different skill positions. Manohar, through years of experience in HRM, knows the complex-
ity of the task and also the crucial role the wage structure will play in attracting and retaining skilled manpower. Th e new
generation of power plants uses high degrees of automation and control, and requires highly skilled technicians with varied
experiences. Manohar’s training in this field led him to a systematic thought process of first examining the structure pro-
posed by the Project Consultant, the minimum wage notification in the area, the wages paid by industry in the same area,
lowest and highest wages paid in the area, what competitors are paying in the same industry, designing of scales according
to hierarchical levels, and also internal equity based on job evaluation, components of wage and projected labour cost as a
percentage of total cost for expected return on investment. He would also have to see if any agreements are in place between
the employer’s association and the employees’ association at a regional/state level. Then, there would be strategic decisions
whether the company wants to lead the market in terms of wages or wants to be in line with the market, or even pitch for a
wage level slightly lower than the market. What percentage of wages would be fixed and what would be productivity linked?
Manohar has his job cut out for him and he knows that the wage structure and a fair administration of the same would be
of critical importance for the project to take off successfully.
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Wage Determination, Wage
Administration and Employee
Relations
Our Constitution accepts the responsibility of the State to create an economic order in which every citizen
finds employment and receives a “fair wage”. One of the earliest decisions taken by the government of free
India was to set up a committee to define fair wage, and indicate the economic and legal means for ensuring a
fair wage to every employed citizen. An examination of this question established the integral relation between
quantum of the fair wage and the capacity to pay the wage, and the need to balance and constantly upgrade
both to ensure a fair standard of life, social security and social justice.
Report of the Second National Commission on Labour, Chapter XII-III (para 12.132)
Wage administration is a process that is influenced by many factors, internal to the unit as well as the
larger external environment.
15.1 The Context and Concepts of Wage

The Oxford English Dictionary defines “wage” as “regular payment to an employee for his or her
work”. “Salary”, on the other hand, is defined as “fixed regular (usually monthly) payment to an
employee”. The various Labour Laws have their own definitions of what constitutes “wages”. For our
purpose, we will consider wage to be a regular payment to an employee for his/her work. In addition,
we will restrict our treatment of the subject to the organized sector only.
Wage is basically the price that an organization is willing to pay for having a particular job car-
ried out as also the price at which an employee is willing to sell his/her labour. In a perfect market,
the price determination would take place through an interaction of the market forces.
However, we all know that the above is not entirely true in an industrial environment, more so
in India, where the government has a welfare orientation and improving the lot of working class is
enshrined in our Constitution also. Employees, being the weaker of the employer–employee pair, need
support of the State to strengthen their negotiating power in wage determination. Over the years,
therefore, the government, through various mechanisms like legislations, Wage Boards, commis-
sions and committees, has stepped in favour of the employees. Since a majority of disputes between
employers and employees have wages as a cause, the judicial pronouncements of higher courts have
also influenced, in many instances, policies relating to wages in industries. Of late, national-level
sectoral bargaining between employers and national trade unions in select industries (e.g. banks and
steel) has also emerged.
15.1.1 Minimum Wage, Fair Wage and Living Wage

How does the State intervene to prevent exploitation of labour, where the bargaining power is
unequal? There is also the constitutional responsibility for the State to strive for the payment of
“fair wages” to all its employed citizens. The determination of that number, which can be construed
as “fair wage”, is a complex issue that has vexed the minds of many a committee formed for this
M15_SING6013_01_C15.indd 323 6/15/10 3:46:19 PM

purpose. Should there be a certain floor level of wages to be paid by the employer to the
“Wage” may be defined employee? What could be the basis for such determination? Should it be adequate only
as “regular payment to
an employee for his or for taking care of the basic requirements of food, shelter and clothing? Or should it be
her work”. “Salary”, on something more? Should it be uniform across the country irrespective of price variations
the other hand, is defined across regions? These questions led the government to constitute Committee on Fair Wages
as “fixed regular (usually (CFW), which proposed the following three “levels” (we will learn more when we discuss
monthly) payment to an the evolution):
employee”.
Minimum Wage
Fair Wage
WAGE
Living Wage
Wage is basically the
price that an organization Figure 15.1 titled “Different levels of wages” explain the thinking behind the proposed levels.
is willing to pay for having
The consensus so far is on the definitions of the three levels. “Fair wage” is a level between
a particular job carried
out as also the price at the “living wage” and “minimum wage”. Living wage must take into account the capacity of
which an employee is will- the employer to pay while a uniform minimum wage for the entire country for all classes of
ing to sell his/her labour. industrial workers has not been determined. In fact, the issue of having such uniformity itself
In a perfect market, the is debatable. In the absence of a single number, The Minimum Wages Act, 1948 prescribes
price determination would
procedures for establishing statutory “minimum wages” for different regions and different
take place through an
interaction of the market categories of employees. The Indian Labour Conference (15th Session, 1957) prescribed
forces. norms for the calculation of “need-based minimum wage” by way of defining the compo-
nents of food, clothing, shelter and other essentials that must be taken into account for cal-
culating the minimum wage.
Figure 15.1
Different levels of wages. Enable the employee to
provide for himself and his
family:
Education to children
Protection against ill health
Essential social needs
Insurance against
Living Wage misfortunes, including old
age
+
Food + Clothing + Shelter
(Upper Limit = Capacity to
Pay)
Between Minimum Wage

Fair Wage
(Statutory) and Living Wage
Enable the employee to:
Preserve the efficiency

(some education, medical
Minimum Wage
requirements)
+
Have bare sustenance of life
(Food + Clothing + Shelter)
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Wage Determination, Wage Administration and Employee Relations 325
The minimum wage, thus, could be calculated with the following guidelines:
“Fair wage” is a level
The standard working-class family should be taken to consist of three consumption between the “living wage”
and “minimum wage”.
units.
Living wage must take
Minimum food requirement should be calculated on the basis of a net intake of 2,700 into account the capacity
of the employer to pay,
calories.
while a uniform mini-
Total annual clothing requirement @ 18 yards per capita = 18 4 = 72 Yards. mum wage for the entire
country for all classes of
Housing should be the minimum rent charged by the government in any area pro- industrial workers has not
vided under the Subsidized Industrial Housing Scheme for Low Income. been determined.
Fuel, lighting and other miscellaneous items of expenditure should constitute 20 per cent
of total minimum wage. The Determination of
Minimum Wage
Standard working-
class family = 3
15.2 The Evolution of Wage Administration consumption units
in India Minimum food
requirement = Net
Wage administration in India comprises a mix of methods that take into account various intake of 2,700
calories
internal and external factors. The following tools/methods have been used in combination
Total annual clothing
over a period of time for wage administration: requirement = 18
Legislation yards per capita = 72
Yards
Recommendation of expert committees/commissions Housing = Minimum
rent charged by
Wage Boards the government in
any area under the
Job evaluation Subsidized Industrial
Collective bargaining Housing Scheme for
Low Income
These are not mutually exclusive but used in combination in different circumstances. Fuel, lighting and
other miscellaneous
items = 20 per cent of
total minimum wage.
15.2.1 Legislation
The first direct intervention by the State towards regulation of wages was the enactment of
The Payment of Wages Act, 1936. Prior to this, disputes relating to wages were largely han- An initiative was taken
dled within the provisions of The Trade Disputes Act, 1929, and the machinery therein for by the government in
1946 to give guidance
settling disputes. The Payment of Wages Act made provisions that regulated the time and the to legislative and other
mode of payment of wages. The Defence of India Rules (1942) provided further avenues for measures. It suggested
the resolution of disputes through adjudication and conciliation, which were later incorpo- evolving legislative and
rated in the ID Act, 1947. administrative measures
A specific initiative was taken by the government in 1946 to give guidance to legislative to bring about the fol-
lowing:
and other measures over a period of time. It suggested evolving legislative and administrative
measures to bring about the following: Statutory determination
of minimum wages in
Statutory determination of minimum wages in “sweated” industry “sweated” industry
Standardization of
Standardization of wages and terms of employment in major industries wages and terms of
Defining and pr omoting “fair wages”, ensuring the welfare of workers as well as keep- employment in major
industries
ing in mind the capacity to pay
Defining and promot-
The Minimum Wages Act was enacted in 1948. The Act set out procedures for determining “fair wages”,
ing the minimum wage in certain scheduled employments. The Payment of Bonus Act, ensuring the welfare
of workers as well as
1965 was another piece of legislation related to wages. We have discussed this in detail in keeping in mind the
Chapter 11. capacity to pay
M15_SING6013_01_C15.indd 325 6/15/10 3:46:25 PM

15.2.2 Policy Recommendations and Resolutions

The Industrial Truce Resolution (1947): To bring a halt to or slow down the deteriorating
condition of IR in the country, the Government of India convened a tripartite meeting in
December of 1947, where The Industrial Truce Resolution (1947) was taken out, in which,
amongst other things, the three parties resolved to ensure fair wages to labour, fair return on
capital to industry and provision for expansion and running of the industry. With the shap-
ing of direction towards a socialistic pattern of society, these measures purported to prevent
excessive profits.
The Industrial Policy Resolution (IPR - 1948): The IPR reiterated the earlier direction of
the government and put forth the following objectives:
The determination of statutory minimum wages for “sweated” industry and
The encouragement of “fair wage” agreements in industry
This paved the way for the CFW, a tripartite committee, which was to study the matter of fair
wage and recommend criteria for the determination of fair wages.
Tripartite Committee on Fair Wages: Besides defining the three levels of wages, the CFW
examined and gave its views on many related issues:
Fair wage must be pegged somewhere between living wage and minimum wage, giv-
ing weight to factors such as productivity of labour, prevailing wage rates in simi-
lar jobs in nearby areas, national income and the pattern of its distribution and the
nature of the industry in terms of its contribution to the national economy.
Collective bargaining on wages, where both parties had bargaining power, would be
very close to the level of fair wages. Where this was not the case, there may be distor-
tions in wage levels and this fact must be kept in mind.
Collective bargaining on wages had so far not taken roots across the industries and,
therefore, it was likely that the workers were not getting wages commensurate with
their effort and contribution.
While determining the capacity of an industry to pay, rather than considering indi-
vidual establishments, the profit-making capacity of a particular industry in the entire
region (state) must be taken into account (industry-cum-region basis).
The level of wages must consider enabling an industry to produce with efficiency.
Wage differentials among different occupations must be based on criteria such as
skill requirement, effort and strain, the number of years of experience required to
perform, training requirements for the job, responsibilities and accountabilities of the
job and conditions of the workplace.
Wage-fixation machinery could go into effecting all the above.
Wage Board
A wage board is a
tripartite body, which has 15.2.3 Wage Boards
1
representation of employ-
ers and labour besides In
I the above context, the Government of India, through the First and Second Five Year Plan,
independent members. rrecommended setting up of Wage Boards to meet the aspirations of labour, and also to give
Wage Board was envis- eeffect to principles mentioned in the above paragraphs.
aged as machinery for
wage fixation in specified Wage Board is a tripartite body, which has representation of employers and labour
industries, and also as besides independent members. The representatives of the employers and employees were to
b
a means for implement- be nominated by their respective organizations, whereas the government nominated others.
b
ing many wage-related Wage Board was envisaged as machinery for wage fixation in specified industries and also a
W
policies and principles means for implementing many wage-related policies and principles laid down by the various
m
laid down by the various
committees and commis- ccommittees and commissions. The Wage Boards, till early 1970s, served a pivotal role in the
sions. wage administration in important industries. Some of the industries for which these Boards
w
were set up were:
w
M15_SING6013_01_C15.indd 326 6/15/10 3:46:25 PM

Cotton Textile
Jute
Plantation
Mines
Iron and Steel
Chemicals
Sugar
Cement
Railways
Post and Telegraph
Ports and Docks
The number of Wage Boards declined from 19 in the late 1960s to only 2 in the late 1990s
(one for journalists and the other for non-journalist newspaper employees)1.
The Wage Boards function industry-wise with broad terms of reference, which include
recommending the minimum wage, differentials, cost-of-living compensation, regional wage
differentials, hours of work, etc.
Although the Wage Boards are set up by the government, another reason for their estab-
lishment could also be pressure created by the trade unions; industrial federations on the one
hand, and the employers’ formal or informal consent on the other. The demands for the Wage
Boards are backed either by threatened or actual strikes. Pressure has been used in the case of
appointment of Wage Boards for the jute industry by the jute workers’ association and for the
coal-mining industry by the trade union. The formation of Wage Boards in other industries
has been the result of similar demands and pressures on the part of the trade unions, such as
plantations, iron and steel, engineering, sugar and electricity.
The functioning of the Board comprises three steps, namely:
Systematic information-gathering on wage rates in the industry, differentials, paying
capacity of the industry
Public-hearing of the points of view of each of the parties
Private discussions with parties where proposals and counter-proposals are made and
heard
The Wage Boards, despite the long time that they took in submitting their reports, served a
useful purpose when the collective bargaining in the industry had not taken roots. Gradually,
with the emergence of strong plant/unit-level trade unions, the utility of Wage Boards came
down. The increased union militancy of the 1970s enabled these plant-level unions to bar-
gain very good wage agreements. Also, during this period, sectoral bargaining at the national
level was going on in industries in which the government was the dominant player . These
industries included iron and steel, docks and ports, banks, coal, etc. What this means is that
a single employer body (representing all units in the industry), the administrative ministry
and federations of national trade unions representing the industry negotiated a long-term
settlement on wages.
15.2.4 Job Evaluation

Job evaluation is a scientific method to determine the “relative” worth of a job in comparison
to other jobs within an organization. Job evaluation helps establish internal equity within
the organization, also enabling inter-organization comparisons. The fundamental concept is
based on the assumption that every job comprises a few factors that an employer is willing to
M15_SING6013_01_C15.indd 327 6/15/10 3:46:26 PM

c
compensate; for example, skill requirement, responsibility, effort, hazard and working condi-
Job Evaluation
ttions could be a few of these factors. The aim is to isolate the compensable factors for each
Job evaluation is a scien- jjob, determine the extent of requirement of the compensable factors and then determine the
tific method to determine
the “relative” worth of aamount to be compensated per unit of the compensable factors. Job descriptions and job
a job in comparison aanalyses are the major inputs to job evaluation. We will not go into details here, since this
to other jobs within would have been covered in the HRM.
w
an organization. Job
evaluation helps establish
internal equity within
the organization, also 15.3 Components and Determinants
1
enabling inter-organization
comparisons. of Wage
15.3.1 Components of Wage
1
Traditionally, the wage comprised the following:
Basic
Dearness Allowance
Bonus
Incentives
Other Benefits and Allowances
Few of these components form the fixed part of the wage, whereas others may vary. The
recent trend is for the employer to increase the variable portion linked to productivity and
efficiency, and keep the fixed part as low as possible. An employee, on the other hand, may
prefer a higher portion of his/her wages as fixed in order to have stability of income.
Basic wage remains fixed over a period of time for a prescribed level of output. Basic
wage, many times, is the reference figure for various allowances and, hence, a high basic
serves the purpose of affecting the other allowances too, besides remaining stable over time.
In the organized sector, the statutory minimum wage is losing its relevance, but it remains the
floor price of the job since a wage below the stator minimum is out of consideration.
Dearness allowance was introduced to compensate the employees from erosion in
income due to the rise in prices. DA has been a contentious issue and the cause of many
disputes and even industrial action. Typically, DA is linked to some price index, and com-
pensates employees for the rise in inflation through “neutralization” of increase in the index,
thus protecting income. A few establishments pay DA according to a fixed system, whereas
others use a variable system or a moving system linked to consumer price index. Yet other
organizations use a mixed system. The issue of DA has been a major issue mainly for the PSU
and government employees and a matter of examination by various committees and even the
higher judiciary. The report of the second NCL laments the considerable delay in conduct-
ing a survey to construct the index numbers. The delay, according to the report, defeats the
very purpose of linking DA to the price index since consumption pattern of the population
undergoes changes, many varieties of items go out of the market and prices for them are not
available.2
A minimum bonus to employees who fall within the eligibility criteria is obligatory 8.33
per cent of annual wages (basic + DA) on pro-rata basis is payable to all employees. The issue
of bonus payment has been discussed in detail in Chapter 11. Pertinent to this chapter is the
fact that the payment of bonus has remained a contentious issue and, on the balance, it has
satisfied neither the employer nor the employees. The payment of bonus has been the reason
for many disputes resulting in industrial action. A bonus amount, between 8.33 per cent
and 20 per cent is negotiable, provided the allocable surplus is above the minimum amount.
Mostly, statutory bonus is used to further negotiate an ex-gratia amount for employees who
are not covered under the Payment of Bonus Act.
The assumption behind wage incentives is that increasing the earnings of an employee
will improve his efficiency or, rather the other way round, the anticipation of higher earnings
M15_SING6013_01_C15.indd 328 6/15/10 3:46:26 PM

will motivate him or her to greater effort and efficiency. Used correctly, incentives may ben-
efit both, the employees and the management, by increasing earnings for the employee and
by improving productivity for the management. More and more employers are trying to link
part of the wages to some parameter of performance, e.g., quality, output and reduction in
rejects. While we do not have the data, the trend in the new-economy companies is to have
a substantial portion of wage as a variable component, contingent upon achieving a pre-
defined standard of performance. For the employer, this makes sense in a fiercely competitive
and dynamic environment. This should work for employees also, since economic needs are
important. However, for an incentive scheme to work, the following must be kept in mind:
The “standards” of performance must be clear and simple and understood by all.
The linkage of performance to incentive payment must be clear and simple, and
understood well by the employees.
The “standards” of performance must be accepted by the employees.
The incentive must be seen as motivating.
Payment must be prompt and calculation must be transparent and unambiguous.
There must be a provision to “appeal”.
15.3.2 Determinants of Wage

In the chapter-opening case, “The Power Project”, Mr Satpathy tries to systematically map
the factors that he would have to take into account while determining a wage structure
for the project. Whether green field or brown field or an operating organization, the fac-
tors that come into play are similar in the organized industry. Figure 15.2, “Dynamics of
wage determination”, captures all the variables that interact to determine the wage, wage
levels and wage structure in an organization. In the case of Mr Satpathy, what would be
Figure 15.2
Collective Bargaining
Wage Rates for the Dynamics of wage
Awards of Wage Job in surrounding determination.
Boards area
Awards of
Tribunals/Courts/
Arbitration
Components of
Price for the Job Wage
Strategy – at par with

market, above market Relative Worth of a
or below market Job within the
organizational
Industrial or
Regional
determination
Interplay of these variables in a
particular organizational context
would result in the wage structure at a
particular plant
M15_SING6013_01_C15.indd 329 6/15/10 3:46:26 PM

the most important variables in play? How would the variables change in case of a pub-
lic sector company and a private sector company? Would the location of the industrial
establishment—industrial hub vis-a-vis an industrially backward and remote region—
make a difference?
15.4 Wage Structure

The term “wage structure” signifies the relationship of wage rates for the entire job
within the company, industry or labour market areas. The internal wage structure of
an organization or company is, thus, established by the relative grading or positioning
of jobs within it (i.e., the company) in terms of pay, and it may, therefore, be defined
in terms of job or labour grades with either a flat wage rate or a range of rates for each
grade that may be applicable to a number of jobs in various departments or units.
Organizations may maintain two paralleled wage/salary structure, one for the hourly
rated and the other for salaried employees. In setting up a wage structure, necessary
information to be used is usually derived from some kind of “job evaluation” system
or method.
15.4.1 The Purpose of Wage Structure

The primary objective of wage administration is to establish and maintain a fair and equitable
wage structure. This means that the chances of favouritism in respect of compensation to
workers or employees should be eliminated and efforts should be made to provide compensa-
tion to individuals in accordance with the requirements of their jobs.
An internally consistent relationship amongst jobs is the very essence of a wage struc-
ture. It is important for both the management and the employees. The management must be
able to justify its reasons for structuring jobs in a particular order. The other input for the
wage structure comes from inputs from the surrounding region or industry or trade or skill.
Together, these two (internal alignment of jobs and external input) form the basis for a wage
structure.
15.5 Towards a Wage Policy

The term “wage policy” in a country like India refers to legislation or government action
calculated to affect the level or structure of wages, or both, for the purpose of attaining spe-
cific objectives of social and economic policy. The social objectives that a wage policy may be
instrumental in attaining may include the elimination of exceptionally low wages, the estab-
lishment of “fair” labour standards and the protection of wage-earners from the effect of ris-
ing prices. Another aim of wage policy is to increase the economic welfare of the community
as a whole. In developing economies, objectives of the wage policy should be established, and
the level and structure of wages should be conducive to accelerated economic development.
The objectives of the wage policy in an under-developed or developing economy have, thus,
been summarized as follows:
a) To abolish malpractices and abuses in wage payment
b) To set minimum wages for workers whose bargaining position is weak because
they are either unorganized or inefficiently organized, and this should be accom-
panied by separate measures to promote the growth of trade unions and collective
bargaining
c) To obtain for the workers a just share in the fruits of economic development
supplemented by appropriate measures to keep workers’ expenditure on con-
sumption goods in step with available supplies so as to minimize inflationary
pressure
M15_SING6013_01_C15.indd 330 6/15/10 3:46:32 PM

d) To bring about a more efficient allocation and utilization of manpower through

wage differentials and, where appropriate, systems of payments by results
Although the Government of India has not formulated a “wage policy”, recommendations
of committees like CFW, Pay Commissions, NLC, ILC, ILO Conventions, Truce Resolutions
and Five Year Plans have guided the policymakers and the executive from time to time. With
progressive opening up of the economy and competitive pressures, the possibility of a rigid
wage policy in the organized sector appears remote. The National Commission on Labour
points towards evolving a productivity-linked wage for the organized sector. The productivity-
linked wage will then have the structure of: total wage = basic wage + variable component
(depending on productivity). Basic principles of productivity-wage reform should include
the following:
Wages should aim at providing an adequate standard of living to workers.
Wage increase must take into account the company’s capacity to pay.
The wage must reflect the value of the job.
There must be a variable component to accommodate business cycles.
Wage increase must be commensurate with productivity growth:3
But the above is a tall ask since the unions are in no mood yet to discuss the issue, let alone
accept it.
SUMMARY
Wage is basically the price that an organization is willing to Legislation
pay for having a particular job carried out as also the price at
Recommendation of expert committees/commissions
which an employee is willing to sell his/her labour.
Wage Boards
In a perfect market, the price determination would take
place through the interaction of the market forces. Job evaluation
In India, the government has a welfare orientation and Collective bargaining

improving the lot of working class is enshrined in our
Traditionally, the wage comprised the following:
Constitution also. Over the years, therefore, the government,
through various mechanisms such as legislations, Wage Boards, Basic
commissions and committees, has stepped in favour of the
Dearness Allowance
employees.
Bonus
There is constitutional responsibility for the State to strive
for payment of “fair wages” to all its employed citizens. Incentives
The government constituted Committee on Fair Wages Other Benefits and Allowances
(CFW), which proposed the following three “levels”:
The interplay of a number of internal and external variables
Minimum Wage determines the wage structure in a particular organizational
context.
Fair Wage
The term “wage structure” signifies the relationship of
Living Wage
wage rates for the entire job within the company, industry
The Indian Labour Conference (15th Session, 1957) or labour market areas. The primary objective of wage
prescribed norms for the calculation of “need-based administration is to establish and maintain a fair and
minimum wage” by way of defining the components of equitable wage structure.
food, clothing, shelter and other essentials that must
The term “wage policy” in a country like India refers to
be taken into account for calculating the minimum
legislation or government action calculated to affect the
wage. The following tools/methods have been used
level or structure of wages, or both, for the purpose of
in combination over a period of time for wage
attaining specific objectives of social and economic policy.
administration:
M15_SING6013_01_C15.indd 331 6/15/10 3:46:32 PM

Although the Government of India has not formulated a The National Commission on Labour points towards
“wage policy”, recommendations of committees such as evolving a productivity-linked wage for the organized sector.
CFW, Pay Commissions, NLC, ILC, ILO Conventions, The productivity-linked wage will then have the structure of:
Truce Resolutions and Five Year Plans have guided the total wage = basic wage + variable component (depending
policymakers and the executive from time to time. on productivity).
KEY TERMS
fair wage 324 minimum wage 324 wage board 325
job evaluation 325 salary 323 wage structure 329
living wage 324 wage 323
REVIEW QUESTIONS
1 Trace the evolution of wage administration in India. 4 Discuss the evaluation and development of wage policy in
India.
2 Describe the concept behind “wage levels”. Do you think the
government has been able to discharge its obligation on fair 5 For what purposes have wage boards been constituted? Do
wages? Explain your answer. you think they can serve any useful purpose today? Why?
3 Schematically explain the determinants of wage in 6 State the main objectives of the regulation of wages.
an industrial unit. Explain the purpose of wage
7 Discuss the composition and functions of a Wage Board.
structure.

1 What do you think to be the main disadvantages of a 2 Do you think that the Indian State has focused more on
productivity-linked wage? What reservations can the the minimum wage and not enough on linking wage to
employees have to this? productivity?
D E B AT E
1 It is best to let the market forces decide the wage in the
industry. The organized sector does not need any State-
sponsored policy on wages. Discuss.
TISCO subsidiary at Burnpur, which, because of obsolete machinery
and processes, was incurring a loss and had been referred
The Steel Industry in India has a standing bipartite committee
to the Bureau of Industrial Finance and Restructuring (BIFR).
that negotiates and settles long-term agreements on wages
Experts felt that with some investment, IISCO could be
for all the integrated steel plants in the country. Due to
turned around into a profit-making company. Normally,
this mechanism, with participation from all the steel-plant
the wage agreements were signed every four to five years,
managements and major national trade unions, there has
and in the year 1995, another revision was due. SAIL had
been no strike in the steel industry on wage-related issues
made record profits, and it was hoped that the wage issue
for more than 30 years now. SAIL is one of the major steel
would be settled soon. However, there was a directive from
producers with 4 integrated steel plants with a combined
the government (as majority stakeholder in SAIL and IISCO)
capacity of 12 million tonnes per annum. SAIL also has a
M15_SING6013_01_C15.indd 332 6/15/10 3:46:32 PM

that the loss-making units will have to forego the wage pressure on SAIL, since SAIL was under pressure from its own
revision. The employees of IISCO were very agitated by 1,50,000 strong labour force.
this stand of the government and started putting pressure
What kind of negotiation process is this?
on their management as well as the national trade unions.
SAIL agreed to “loan” the money to IISCO for effecting the Debate the stand of the government and the trade unions.
wage agreement, but the government did not agree. The
Is there a way out of this impasse?
unions threatened to boycott the meeting, creating further
NOTES
1 Report of Second National Commission on Labour, Chapter 3 Report of 2nd NCL, para 12.306, p. 14–01.
XVII-III, para 12.156, p. 13–46.
2 Report of NCL, para 12.164, p. 13–49.
SUGGESTED READING
Subramaniam, K. N., Wages in India (New Delhi: Tata Mcgraw- The Report of the First National Commission on Labour, 1969,
Hill, 1979). Government of India.
The Report of the Second National Commission on Labour, 2002,

M15_SING6013_01_C15.indd 333 6/15/10 3:46:32 PM

chapter sixteen
16.1 An Introduction to Labour Administration After reading this chapter, you will be able to:
16.2 Scope of Labour Administration • Understand the meaning of labour
16.3 The Evolution of Labour Administration administration
in India • Trace the evolution of labour administration
16.4 Labour Policy in India in India
16.5 Labour Laws • Form an overall understanding of the forces
16.6 Voluntary Arrangements that have helped shape the labour policy in
16.7 Labour Administrative Machinery of the India
Government • Have a clear idea of the labour
16.8 The Role of ILO in Labour Administration administrative machinery, subordinate
16.9 Recommendations of the Second organizations and voluntary arrangements
National Commission on Labour, 2002 • Appreciate the role that ILO has played in
setting standards for labour administration
• Know the recommendations made by the
National Commission on Labour
The Central Industrial Relations Machinery

There are approximately 150,000 establishments in the central sphere. The inspecting officers of CIRM (Central Industrial
Relations Machinery) inspect these establishments under different labour enactments through routine inspections and special
drives for inspections under the crash-inspection programmes and taskforce inspections to secure benefits of the beneficial leg-
islations to workers. Special emphasis is given to the enforcement of beneficial enactments such as Contract Labour (Regulation
and Abolition) Act and Minimum Wages Act and Building and Other Construction Workers (Regulation of Employment and
Conditions of Service) Act, 1996 in the unorganized sector. Prosecutions are launched against persistent defaulters and in respect
of major violations. During the year 2001–2002, CIRM officers carried out 34,968 inspections, rectified 3,60,712 irregularities,
launched 16,040 prosecutions and secured 7,475 convictions of defaulting employers.
Another important function of the CIRM is the enforcement of labour laws in the establishments for which the central govern-
ment is the appropriate government. The machinery enforces the following labour laws and rules framed thereunder:
1. Payment of Wages Act, 1936 and rules made thereunder for mines, railways, air transport services and docks, wharves and
jetties
2. Minimum Wages Act, 1948 and rules
3. Contract Labour (Regulation and Abolition) Act, 1970 and rules
4. Equal Remuneration Act, 1976 and rules
5. Inter-State Migrant Workmen (RE&CS) Act, 1979 and rules
6. Child Labour (Prohibition and Regulation) Act, 1986 and rules
7. Payment of Gratuity Act, 1972 and rules
8. Labour laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Act 1988
9. Building and Other Constructions Workers (RE&CS) Act, 1996 and rules
10. Chapter VI-A of the Indian Railway Act; Hours of Employment Regulations for Railways Employees
11. Industrial Employment (Standing Orders) Act, 1946 and rules
12. Maternity Benefit Act, 1961 (Mines and Circus Rules, 1963); and rules
13. Payment of Bonus Act, 1965
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Labour Administration
Labour administration means public-administration activities to translate national labour policy into action.
The Central Industrial Relations Machinery (also known as the Office of Chief Labour
Commissioner—Central) is one of the many agencies of the government that ensures that some of
the policies concerning labour are implemented. There are many such agencies, each charged with
specific responsibilities for ensuring compliance of the labour policies. In this chapter, we will try to
understand the contours of the policies and the myriad network of organizations that help put these
policies into action.
16.1 An Introduction to Labour Administration

Labour administration is primarily concerned with the affairs of labour and administration of social
policy. The meeting of experts on labour administration held in Geneva in October 1973 felt that to
effectively deal with the vital aspects related to labour administration, there should be central, spe-
cialized units for each of the following:
a) Labour protection (working conditions, terms of employment and service, wages, safety, etc.)
b) Labour inspection
c) Labour relations
d) Employment of manpower, including training
e) Social security
Labour administration is not simply the responsibility of the Department of Labour. Many agencies
and government departments such as Chambers of Commerce, Factory and Mines Inspectorate,
Social Insurance Directorate and the Department of Human Resource Development and Education
are involved in it. In some countries, the organizations of employers and workers are also involved
in the administration of labour matters. But it is primarily the responsibility of the Department of
Labour to lay down, develop and apply sound labour policies, coordinate various recommenda-
tions received from various departments, which have a bearing on labour affairs. The formulation of
policy decisions are based on consultation with other interests (particularly of employers’ and work-
ers’ organizations) and of research and field investigation. Most of the labour-policy proposals may
emanate from the Minister of Labour himself or from his department. The Department of Labour
is the body that receives most such proposals and initiates the preparatory process. In some cases,
Labour Courts, arbitration bodies and different ad hoc commissions can be regarded as forming
part of the labour-administration machinery, although they are usually outside the Department of
Labour. These bodies are either bipartite or tripartite in character.
16.1.1 The Concept of Labour Administration

The Labour Administration Convention No.150, 1978 of ILO defines “labour administration” as “public
administration activities in the field of labour policy”. According to the same Convention, the term “sys-
tem of labour administration” covers “all public administration bodies responsible for and/or engaged in
M16_SING6013_01_C16.indd 335 6/15/10 3:49:24 PM

l
labour administration—whether they are ministerial departments or public agencies, including
Labour administration
concerns itself with parastatal and regional or local agencies, and any other form of decentralized administration—
p
translating the labour aand any institutional framework for the coordination of the activities of such bodies and for
policy into action. Effective cconsultation with and participation by employers and workers and their organizations”.1
labour administration In brief, labour administration involves the entire range of activities from preparing
machinery must be able ground
g work, actual preparation, networking, cooperating and coordinating, facilitating dia-
to address the following:
logue,
l checking, reviewing and monitoring labour policies and programmes, the prepara-
Labour protection tion
t and enforcement of labour laws and regulations, and establishment and enforcement of
(working conditions, standards
s in the field of labour. An important feature of labour administration is the involve-
terms of employment
and service, wages, ment
m of employers’ and workers’ organizations in various areas and at various levels of labour
safety, etc.) administration.
a
Labour inspection A robust system of labour administration would:
Labour relations Be capable of responding to changing economic and social conditions
Employment of man-
power, including training Justify the confidence of both employers and workers
Social security
Make a vital contribution to the improvement of working conditions and at the same
time to national development
Develop participation through social dialogue and tripartism
“System of labour
Acquire credibility on account of the fairness of labour policies
administration” covers
“all public administra- Make known and apply uniformly the laws and regulations
tion bodies responsible
for and/or engaged in Demonstrate elements of transparency through openness in decision-making
labour administration—
whether they are min- Make available the services in labour administration without discrimination
isterial departments or
public agencies, including IIn brief, labour administration contributes to the creation of an environment in the realm
parastatal and regional or of
o employment that has elements of “participation”, “credibility”, “transparency” and
local agencies, and any “responsibility”.
“
other form of decentral-
ized administration—and
any institutional frame-
work for the coordination 16.2 Scope of Labour Administration
of the activities of such
bodies and for consulta- The scope or fields of activities under labour administration have expanded during the course
tion with and participation of time. Initially confined to the enforcement of a few labour laws or regulations, labour admin-
o
by employers and workers istration
i has come to cover within its fold a wide variety of subjects. Substantial enlargement
and their organizations – of
o the number and contents of labour laws and regulations all the more necessitated the estab-
ILO Convention on LA lishment
l of a network of labour-administration agencies. State regulation of labour matters
(1978)
became
b necessary also from many other considerations. The broad areas covered under labour
administration
a today, whether statutory or non-statutory, include—contracts and terms of
employment,
e wages, working conditions, industrial relations, social security, employment
The broad areas covered and
a unemployment, training, employment of children and women, organizations of work-
under labour adminis- ers
e and employers, information and research, and industrial disputes and work stoppages.
tration today, whether
statutory or non-statutory, The specific fields of labour-administration activities include—quantum of wages including
include—contracts and minimum
m wages, protection of wages, fringe-benefits, bonus, hours of work, holidays, leave,
terms of employment, physical
p working conditions, occupational safety and health, maternity protection, workmen’s
wages, working condi- compensation,
c provident fund and pension, gratuity, sickness benefit, medical benefit, unem-
tions, industrial relations, ployment
p benefit, employment policy, employment exchange, training, vocational guidance,
social security, employ-
ment and unemployment, labour-welfare
l measures, collective bargaining, industrial actions including strikes and lock-
training, employment of outs,
o workers’ participation in management, trade unions, employers’ organizations, unfair
children and women, labour
l practices, tripartite forums, employment of children and women, collection and dis-
organizations of workers semination
s of information relating to labour, labour surveys, and so on. The degree of empha-
and employers, informa- sis,
s activities undertaken and the extent of intervention vary from country to country.
tion and research, and
industrial disputes and Labour administration is confined not only to the national ministerial departments or
work stoppages. departments
d of state or local government. It also covers the role of other agencies including
workers’
w and employers’ organizations and non-governmental agencies, including workers’
M16_SING6013_01_C16.indd 336 6/15/10 3:49:25 PM

Labour Administration 337
and employers’ organizations and non-governmental (parastatal) agencies at various levels.

The fields of labour-administration activities essentially depend on the nature of labour policy,
labour laws and regulations and practices operating in particular countries at particular times.
Of the agencies involved in labour administration, the national ministerial labour Of the agencies involved
department has to play the most significant role. The International Labour Conference sug- in labour administration,
the national ministerial
gests the following main functions of such a department: labour department has to
1. It should be required to provide the government with all useful information or to play the most significant
role. The Department of
advise it with regard to the elaboration of the government’s labour policy and, where Labour should:
necessary, the preparation of laws and regulations.
Provide the govern-
2. It should be entrusted with the administration of labour laws and regulations, ment. with relevant
the implementation of the government’s labour policy and the handling of labour information to aid
questions. policy formulation
Administer the Labour
3. It should participate at the highest level and on an accepted and reciprocal basis with Laws and labour policy
other government departments in elaboration of policies concerning such objec- Participate at the
tives as eradication of unemployment, industrial peace and other questions relating highest level on the
to labour. elaboration of poli-
cies and handling of
4. It should have at its disposal competent and adequate staff and administrative labour questions
resources such as will enable it to perform its functions efficiently and impartially. Be staffed with com-
petent personnel for
effective and impartial
functioning
16.3 The Evolution of Labour Administration
in India
The sole administration of matters pertaining to labour administration, during the late nine-
teenth century, was enforcement through magistrates. There were just a handful of laws in exis-
tence then (e.g. Fatal Accidents, 1855; Workmen’s Breach of Contract Act, 1859; Employers and
Workmen (Disputes) Act, 1860, etc.) and no “policy” on other aspects of labour prior to 1919.
In general, labour administration during the period was piecemeal and ad hoc with the pri-
mary responsibility vesting with the local magistrate. There was a general lack of coordination
between the central and provincial governments in matters relating to labour administration.
For the first time, the Government of India Act, 1919 defined in some detail the distri-
bution of legislative and administrative powers between the central and provincial govern-
ments. Generally, the central government could enact labour laws relating to mines, railways,
major ports, seamen and international and inter-provincial emigration and the provincial
governments could deliberate on labour matters pertaining to factories, plantations, public
works, inland vessels, labour disputes, labour welfare and housing, but under the control of
the central government.
Between and at a time when the Whitley Commission submitted its report to the
Government of India in 1931, the matters pertaining to labour were handled by the
Department of Industries and Labour. This department, however, dealt with many issues,
labour being just one of them. The Department was headed by a Member of Executive
Council. In the year 1920, few positions of Labour Commissioners were created in the indus-
trially active provinces of Madras and Bengal and a labour office in Mumbai. Subsequently, a
labour office was set up in Bombay in 1921.
The Government of India Act, 1935 laid emphasis on provincial autonomy, thereby
expanding the role of provincial government’s role in matters pertaining to labour. Labour
Commissioners were appointed in almost all the provinces under the popular governments.
This gave a fillip to labour administration and a number of labour laws were enacted (Factories
Act, 1934; Payment of Wages Act, 1936; Mines Act, 1935). These enactments required the
creation of suitable enforcement machinery, both at central as well as provincial levels. The
Second World War and the Defence of India Rules led to the creation of elaborate machinery
for handling industrial disputes and conflicts, which later came to be incorporated under the
ID Act, 1947.
M16_SING6013_01_C16.indd 337 6/15/10 3:49:26 PM

Labour administration came to be further strengthened following the recommenda-

tions of the Investigation Committee. There was a spate of labour laws enacted prior to or
after the attainment of Independence. In 1949, the Government of India ratified ILO’s Labour
Inspection Convention (No.81), 1947 and ensured the incorporation of its provisions in labour
laws of the country. The run up to the current state is covered elsewhere in this chapter.
16.4 Labour Policy in India

The term “labour policy” conjures up different things to different people. It is not a formal
Labour Policy
document
d put together by an agency of the State. It is not a ready reckoner, which one might
The term “labour policy” look
l up for a quick recap. Neither does it originate from one source, nor can a date be men-
includes the treatment
tioned
t when the “labour policy” was finally put in place. Partly, these relate to goals of policy
of labour under consti-
tutional, legislative and and
a in part to the means and instruments of implementation. There are, however, constraints
administrative Acts, rules in
i setting goals as well as on means and instruments. The term “labour policy” includes
and practices, and vari- the
t treatment of labour under constitutional, legislative and administrative Acts, rules and
ous precepts laid down in practices,
p and various precepts laid down in the successive Five Year Plans. The labour policy
the successive Five Year
derives
d its philosophy and content from the Directive Principles of State Policy as laid down
Plans. The labour policy
derives its philosophy and in
i the Constitution and has been evolving in response to the specific needs of the situation
content from the Directive and
a to suit the requirements of planned economic development and social justice.
Principles of State Policy “Labour policy in India draws inspiration and strength partly from the ideas and decla-
as laid down in the rations
r of important national leaders during the Freedom struggle, partly from the debates
Constitution and has been
in
i the Constituent Assembly, partly from the provisions of the Constitution, and partly from
evolving in response to
the specific needs of the International
I Conventions and Recommendations. It has also been significantly influenced by
situation and to suit the the
t deliberations of the various sessions of the Indian Labour Conference and the recommen-
requirements of planned dations
d of various National Committees and Commissions, such as, the Royal Commission
economic development on
o Labour; the National Commission on Labour, 1969; the National Commission on Rural
and social justice.
Labour,
L 1991, and the like”2.
According to the Constitution of India, the enactment and administration of labour laws
is the responsibility of both the union and state governments, which means that on the sub-
ject of Labour, both the state government and the central government can legislate. Matters
relating to labour are distributed amongst three lists contained in one of the Schedules to the
Constitution. The distribution of subjects in the three lists is as follows:
i) Union List
1. Participation in international conferences, associations and other bodies and imple-
menting decisions made thereat
2. Port quarantine, including hospitals connected therewith, seamen’s and marine
hospitals
3. Regulation of labour and safety in mines and oilfields
4. Industrial disputes concerning union employees
In India, 94 per cent workers out of the total workforce of 457.5 million belong to the
unorganized/informal sector. These workers work as agricultural labourers, landless
labourers, factory workers, domestic help, construction workers, etc. Currently the number
of scheduled employments in the central sphere is around 45, whereas the number is
approximately 1200 in the state sphere. The labour administration machinery is largely
geared towards administration and enforcement of standards and laws in the organized
sector. The unorganized sector has largely been neglected which has seen all kinds of
NGOs stepping in. Discuss alternatives or some other models of cooperation between the
public and the administration to promote a more meaningful administration of the labour
laws and labour standards.
M16_SING6013_01_C16.indd 338 6/15/10 3:49:26 PM

5. Union agencies and institutions for:

According to the
i) Professional, vocational or technical training; and Constitution of India, the
enactment and admin-
ii) The promotion of special studies or research; istration of Labour Laws
is the responsibility of
6. Enquiries, surveys and statistics for the purpose of any of the matters in this list both the union and state
governments, which
ii) Concurrent List means that on the subject
1. Economic and social planning of labour, both the state
government and the
2. Trade unions, industrial and labour disputes central government can
legislate.
3. Social security and social insurance; employment and unemployment
4. Welfare of labour, including conditions of work, provident fund, employers’ liability,
workmen’s compensation, invalidity and old-age pensions, and maternity benefits
5. Vocational and technical training of labour
6. Factories
7. Inquiries and statistics for purposes of any of the matters specified in the Concurrent
and the State List
iii) State List
1. Public order
2. Public health and sanitation, hospitals and dispensaries
3. Relief of the disabled and unemployable
The first comprehensive approach to a labour policy was spelled out by the interim gov-
ernment in 1946, when a host of issues were set out on which reforms were to be brought Initial Approach to a
Comprehensive Policy
about through legislations and other measures over a period of time. A few of these issues
were: Minimum wage
Fair wage
Minimum wages in industry, plantations and agriculture Regulating working
Determination and agreements on fair wages conditions in all sectors
Training and appren-
Regulating hours of work, weekly rest periods, spread-over, holidays, privileged leave ticeship
or earned leave for workers in unorganized sectors like shops and establishments and Housing
other sectors not yet brought under legislative protection Health, accident, sick-
ness insurance
Improvement of working conditions in factory with special emphasis on health and Coverage of
safety. Similar provisions to be brought in for other sectors. Workmen’s
Compensation Act
Training and apprenticeship schemes on a large scale to increase productivity on the
Central law for mater-
one hand and earning capacity and promotional avenues on the other nity benefit with wider
Adequate housing for workers subject to the availability of resources coverage
Increasing coverage
Medical and health insurance schemes for the working class of leave with wages in
case of sickness
Revision of the Workmen’s Compensation Act Creches and canteens
A central law for maternity benefits to secure benefits for those other than factory Welfare of coal and
workers the extended scale of benefits provided under the Health Insurance Scheme mica workers
Strengthening of
Extension to other classes of workers of the right, within specified limits, to leave with labour inspectorates
allowance during periods of sickness
Provision of crèches and canteens
Welfare of the coal-mining labour and welfare of the mica-mining labour
Strengthening of the inspection staff and the inspectorate of mines
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The National Commission on Labour (2002) has tried to trace the making of the National
Elements of the Current
Labour Policy
Labour Policy and has summarized in its report the main elements of labour policy operating
L
State as catalyst of
iin the country especially with respect to industry, during the last 20 years:
“change” and welfare i) Recognition of the State, the custodian of the interests of the community, as the
programmes.
catalyst of “change” and welfare programmes
Recognition of the right
to peaceful direct action ii) Recognition of the right of workers to peaceful, direct action if justice is denied to
Mutual settlement, col- them
lective bargaining and
voluntary arbitration iii) Encouragement to mutual settlement, collective bargaining and voluntary arbitration
Intervention by the
State in favour of the
iv) Intervention by the State in favour of the weaker party to ensure fair treatment to all
weaker party to ensure concerned
fair treatment to all
concerned
v) Primacy to the maintenance of industrial peace
Primacy to the main- vi) Evolving partnership between the employer and the employees in a constructive
tenance of industrial endeavour to promote the satisfaction of economic needs of the community in the
peace
best possible manner
Evolving partnership
between the employer vii) Ensuring fair wage standards and provisions of social security
and employees in a
constructive endeavour viii) Cooperation for augmenting production and increasing productivity
Ensuring fair wage
standards and provi-
ix) Adequate enforcement of legislation
sions of social security x) Enhancing the status of the worker in industry
Cooperation for
augmenting produc- xi) Tripartite consultation
tion and increasing
productivity The thrust of the recent labour policy is more towards creating a climate of healthy industrial
Adequate enforcement rrelations and promoting an industrial culture conducive to the improvement in efficiency,
of legislation productivity and real wages.
p
Enhancing the status of
the worker in industry
Tripartite consultation
16.5 Labour Laws
Under the Constitution, the legislative powers in different fields of government activity are
U
shared by the central and state governments, in accordance with the lists, which form a part
of the Constitution—the Union List, the Concurrent List and the State List. The parliament
has exclusive powers to make laws on matters enumerated in the Union List. The state legis-
latures have powers to legislate for the state, or any part thereof on any matter enumerated in
the State List. Both the parliament and the state legislatures have powers to make laws with
respect to matters enumerated in the Concurrent List. To avoid a possible conflict, certain
safeguards are provided for subjects on which both the centre and the state can legislate.
Labour is a subject that is included in the Concurrent List.
At the time of Independence, only a handful of laws existed concerning labour. Post-
Independence, legislative support for matters relating to labour as the weaker section of the
society was given partly by:
i) Strengthening the then existing legislation through suitable amendments
ii) Overhauling a few of them
iii) Supplementing it by new statutes where none had existed before
Important labour legislations that evolved through all these processes since Independence
could be divided into the following main groups:
(i) Legislation about employment and training such as the Dock Workers Regulation
of Employment Act, 1948; the Employment Exchanges (Compulsory Notification of
Vacancies) Act, 1959; the Apprentices Act, 1961; the Tea District Emigrant Labour Act,
1932, and so on
M16_SING6013_01_C16.indd 340 6/15/10 3:49:27 PM

(ii) Legislation on working conditions: This covers the Factories Act, 1948; the Plantations
Labour Act, 1951; the Mines Act, 1952; the Motor Transport Workers’ Act, 1961; and legisla-
tion relating to safety of workers, like the Indian Dock Labourers’ Act, 1934. There have been
Acts like the Children (Pledging of Labour) Act, 1933; the Employment of Children Act, 1938;
the Madras Bidi Industrial Premises (Regulation of Conditions of Work) Act, 1958; the Kerala
Bidi and Cigar Industrial Premises (Regulation of Conditions of Work) Act, 1961, and so on
(iii) Legislation on labour management relations such as the Trade Unions Act, 1926;
the Industrial Employment (Standing Orders) Act, 1946; the Industrial Disputes Act, 1947;
and legislation enacted in some states like the Bombay Industrial Relations Act, 1946; the UP
Classification of
Industrial Disputes Act, 1947; the Madhya Pradesh Industrial Relations Act, 1960, and so on Labour Legislations
(iv) Legislation on wages, earning and social security, which covers the Payment of Wages
Act, 1935; the Employees’ State Insurance Act, 1948; the Coal Mines Provident Fund and Bonus 1. Employment and train-
ing
Act, 1948; the Minimum Wages Act, 1948; the Employees’ Provident Fund Act, 1952; the Assam 2. Working conditions
Tea Plantations Service and Miscellaneous Provisions Act; the Payment of Bonus Act, 1965; the 3. Labour management
Workmen’s Compensation Act, 1923; and the Maternity Benefit Acts (central and states) relations
(v) Legislation on welfare like the Mica Mines Labour Welfare Fund Act, 1946; the Coal 4. Welfare
Mines Labour Welfare Fund Act, 1947; the UP Sugar and Power Alcohol Industries Labour 5. Wages, earnings and
social security
Welfare and Development Fund Act, 1950; the Bombay Labour Welfare Fund Act, 1953; 6. Other miscellaneous
the Assam Tea Plantation Employees’ Welfare Fund Act, 1959; the Iron Ore Mines Labour
Welfare Cess Act, 1961
(vi) Miscellaneous Legislation—The Industrial Statistics Act, 1942; the Collection of
Statistics Act, 1953; the Industrial Development and Regulation Act, 1951; the Companies
Act, 1954 and so on.
The list of legislations mentioned above is illustrative and not exhaustive.
The enforcement and implementation of these laws required the creation of elaborate
administrative machinery, both at the central as well as the state level.
16.6 Voluntary Arrangements

Voluntary arrangements that are evolved in tripartite discussions have added to the benefits,
which are expected to accrue to labour. In this category fall the recommendations of the Indian
Labour Conference, the Standing Labour Committee and Industrial Committees. The benefits
that workers got out of the Wage Board awards so far are also a result of tripartite discussions.
Unanimous recommendations of Wage Board translate into a decision to implement them. The
Code of Discipline, which provides for the recognition of unions and setting up of a grievance
procedure, has also been the result of a tripartite discussion. The arrangements for housing
in plantations were evolved out of an agreement in the Industrial Committee on Plantations.
The introduction of the workers’ education scheme, the setting up of fair-price shops in indus-
trial establishments and the agreement on guidelines for the introduction of rationalization are
some other important matters, which have emerged out of tripartite agreements.
The evolution of labour policy, during the Five Year Plans, has been based upon and
is linked with the programme of the over-all economic development of the country. The
Planning Commission sought to give a concrete shape to the legitimate needs and aspirations
of the working classes, which included fair wages, suitable working and living conditions,
social security, etc. With the acceptance of a socialistic pattern of society as the legitimate
goal of economic development, there was a corresponding shift in the labour policy. This was
reflected in the experiment of workers’ participation in management through the machinery
of joint consultation. Another important shift in the labour policy was the emphasis on col-
lective bargaining in the promotion of healthy industrial relations. The plans also laid stress
on the administrative aspects of the enforcement and implementation machinery. Emphasis
was also laid on voluntary approach to the solution of labour problems as witnessed by the
promulgation of the Code of Discipline in Industry, Code of Conduct, Industrial Truce
Resolution and the various recommendations of the tripartite bodies like the Indian Labour
Conference, and the Standing Labour Committee.
M16_SING6013_01_C16.indd 341 6/15/10 3:49:28 PM

16.7 Labour Administrative Machinery

of the Government
“The main responsibility for labour administration of the Government of India vests in the
Ministry of Labour. The Ministry presently consists of the main Ministry (Secretariat), and
four attached offices, ten subordinate offices, four autonomous organizations, a number of
adjudication bodies and one arbitration body. Labour administration in India is mostly rooted
in labour laws. There are only a few activities that are not based on laws. They are mostly in the
field of workers’ education and craftsmen training other than apprenticeship training, etc.”3
16.7.1 Ministry of Labour

The main Ministry of Labour (Secretariat) is the centre for consideration and decision of all
questions relating to labour so far as the Government of India is concerned. It is the central
administrative machinery “for the formulation of labour policy, enforcement of labour laws
and for the promotion of labour welfare4.” It guides, controls and coordinates the activities of
all organizations and agencies involved in labour administration at the centre or in the states.
The main subjects include:
i) Labour policy (including wage policy) and legislation
ii) Safety, health and welfare of labour
iii) Social security for labour
iv) Policy relating to special target groups such as women and child labour
v) Industrial relations and the enforcement of labour laws in the central sphere
vi) Adjudication of industrial disputes through central government, Industrial
Tribunals, Labour Courts and National Industrial Tribunals
vii) Workers’ education
viii) Labour and employment statistics
ix) Emigration of labour for employment abroad
x) Employment services and vocational training
xi) Administration of central labour and employment services
xii) International cooperation in matters relating to labour and employment
16.7.2 Attached Offices

The offices attached to the Ministry of Labour are:
Office of Chief Labour Commissioner (Central), Also Known as the Central Industrial
Relations Machinery (CIRM): The CIRM came into being in the year 1945 on recommen-
dations of the Royal Commission on Labour. All of its tasks can be categorized under three
major heads namely, enforcement, conciliation and quasi-judicial. It is responsible for:
a) Prevention, investigation and settlement of industrial disputes in the central sphere
b) Implementation of labour laws in industries and establishments in respect of which
the central government is the appropriate government (please refer to the list provided
in the chapter vignette for the list of labour laws for which CIRM is responsible).
c) Enforcement of settlements and awards
d) Verification of the membership of trade unions affiliated to the central organiza-
tions of workers for the purposes of giving them representation in national and
M16_SING6013_01_C16.indd 342 6/15/10 3:49:28 PM

international conferences and committees, and determining their representative

character for recognition under the Code of Discipline
e) Investigation into breaches of Code of Discipline
Directorate General, Factory Advice Service and Labour Institutes: This functions as a
technical arm of the Ministry in regard to matters concerned with safety, health and welfare of
workers in factories and ports and docks. It assists the central government in the formulation
and reviews of policy and legislation on occupational safety and health in factories and ports.
Labour Bureau: This is responsible for
a) Collection, compilation and dissemination of labour statistics
b) Construction and maintenance of Working Class Consumer Price Index Numbers
for selected centres and all-India basis for industrial workers
c) Construction of CPI numbers for agricultural and rural workers
d) Maintenance of up-to-date data relating to working conditions of industrial workers
e) Undertaking research into specific problems concerning labour with a view to sup-
plying data and information needed for the formulation of labour policy
f) Publishing reports, pamphlets and brochures on various aspects of labour
g) Bringing out regular publications of Indian Labour Journal (monthly), Indian Labour
Year Book and Pocket Book of Labour Statistics.
Directorate General, Employment and Training: This is responsible for “laying down the
policies, standards, norms and guidelines in the area of vocational training throughout the
country and also for coordinating employment services5”. Employment service and vocational
training are operated through a countrywide network of employment exchanges, industrial
training institutes and a number of other specialized institutions both at the central and in
the states/union territories.
16.7.3 Subordinate Offices

The Subordinate Offices under the Ministry of Labour are—The Directorate General of Mines
Safety and nine offices of Welfare Commissioners. The Directorate General of Mines Safety is
located in Dhanbad. It is entrusted with the responsibility of enforcing the Mines Act, 1952 and
the Rules and Regulations framed under it. The organization also enforces the Indian Electricity
Act, 1910 as applicable to mines and oil-fields, and Maternity Benefit Act, 1961 in mines.
16.7.4 The Autonomous Organizations

The Autonomous Organizations are:
i) Employees’ State Insurance Corporation
ii) Employees’ Provident Fund Organization
iii) Central Board for Workers’ Education
iv) V. V. Giri National Labour Institute
Employees’ State Insurance Corporation: The organization administers various benefits
under the Act, for instance, sickness benefit, maternity benefit, disablement benefit, depen-
dants’ expenses, funeral benefit, which are cash benefits, and medical benefit. The medical
benefit has been made available to the family members of the insured employees and also to
superannuated employees.
Employees’ Provident Fund Organization: This is responsible for the enforcement of
the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and the schemes
framed under it. The schemes framed and in operation under the Act are: (i) Employees’
M16_SING6013_01_C16.indd 343 6/15/10 3:49:28 PM

Provident Funds Scheme, 1952, (ii) Employees’ Deposit lined Insurance Scheme, 1976, and
(iii) Employees’ Pension Scheme, 1995. The Employees’ Family Pension Scheme, 1971 has
been merged in the Employees’ Pension Scheme, 1995.
V. V. Giri National Labour Institute: This institute was established in 1974 with the objectives of
undertaking training, education and research, either on its own or through collaboration.
The Central Board of Workers’ Education: Established in 1958, the objective of the Board
was to help make the workers aware of their rights and responsibilities through constant train-
ing and education. CBWE is a tripartite body with representations from employers, work-
ers and academics. The headquarter of the CBWE is in Nagpur. The Board has Education
Officers, whose job is to design and deliver courses for the workers.
16.7.5 Adjudication Bodies

Seventeen Central Government Industrial Tribunal-cum-Labour Courts (CGIT) set up under
the Industrial Disputes Act, 1947 were functioning in the country. Of these, two are located
in Mumbai and Dhanbad, and one each in Asansol, Bengaluru, Bhubaneshwar, Chandigarh,
Chennai, Hyderabad, Kolkata, Kanpur, Lucknow, Jabalpur, Jaipur, New Delhi and Nagpur.
16.7.6 Labour Administration Machinery of the State

Government
Labour administration of the state governments is on a pattern similar to central labour
administration with slight variations relating to implementing agencies and the require-
ments of state enactments and non-statutory labour programmes. The main organizations
for labour administration in the states comprise:
i) Department of Labour and Employment (Secretariat)
ii) Office of Labour Commissioner
iii) Chief Inspectorate of Factories
iv) Chief Inspectorate of Boilers
v) Office of Chief Inspector, Shops and Establishments
vi) Directorate, Employment and Training
vii) Directorate, Medical Services (ESI Scheme)
viii) Social Security Directorate
ix) Adjudication Authorities
16.8 The Role of ILO in Labour Administration

From its very inception, ILO has given attention to the subject of labour inspection and
labour administration. It assists countries in the formulation and development of labour
administration and improvement of labour inspection and employment services.
Many conventions and recommendations of ILO deal with labour inspection and labour
administration. A particular mention may be made of Labour Inspection Convention (No.81),
1947; Labour Inspection (Agriculture) Convention (No.129), 1969 and Labour Administration
Convention (No.150), 1978. The relevant recommendations are: Labour Inspection
Recommendation (No.81), 1947; Labour Inspection (Mining and Transport) Recommendation
(No.82), 1947; Labour Inspection (Agriculture) Recommendation (No.133) and Labour
Administration Recommendation (No.158), 1978. Besides, many other conventions and rec-
ommendations also contain provisions relating to labour inspection and administration.
Other contributions of ILO in the field of labour administration and inspection include:
i) Helping Member States in the establishment of efficient labour inspectorates to
ensure the implementation and enforcement of labour laws
M16_SING6013_01_C16.indd 344 6/15/10 3:49:28 PM

ii) Identifying gaps in such laws and proposing remedial measures

iii) Advising employers and workers on compliance with relevant laws and regulations
iv) Rendering help to associate employers and workers and their organizations with the
efforts of labour inspection services
v) Strengthening the links between labour inspectorates and the various competent
bodies concerned with the prevention of occupational accidents and diseases
16.9 Recommendations of the Second

National Commission on Labour, 2002
The National Commission on Labour, in the year 2002, submitted its report to the government.
The Commission devoted an entire chapter to labour administration (Chapter XI). This chapter
details the current status of labour administration in the country and has put forth recommen-
dations for toning up the same. A few of the recommendations pertaining to law, industrial
relations and labour administration organization are listed below. Readers are advised to refer
to the NCL report6 to get a thorough understanding of the state of labour administration.
Labour Laws:
It is necessary to have a clear and unambiguous definition of the “appropriate
government”.
There is a need to have uniformity in the definition of the term “workman”, which
appears in many labour laws.
Labour laws (Exemption from Furnishing Returns and Maintaining Registers by
Certain Establishments) Act, 1988 should be made applicable to all establishments,
and the penalty prescribed under the respective laws should be enhanced to make it
at par with the labour laws (Exemption from Furnishing Returns and Maintaining
Registers by Certain Establishments) Act, 1988.
The employer should be required to maintain registers and display notices at the
work-spot and not elsewhere.
The procedure for prosecution for non-payment of wages and payment of less than
minimum rates of wages should be simplified.
To make enforcement effective, there should be commensurately deterrent punish-
ment under all enactments.
Laws like Payment of Wages Act and Minimum Wages Act should contain a provision
for recovery officers to be appointed by the labour department.
Provisions to grant exemptions from various laws, in case of extreme emergency or
hardship, should vest with the appropriate government, and should be exercised by
officers not below the rank of the Joint Secretary.
Minimum Wages Act should apply to all establishments and not be confined only to
certain scheduled employments.
Criminal cases under labour laws should be tried by Labour Courts, as is being done
in Madhya Pradesh.
Dispute Resolution:
In rights disputes over dismissal, denial of regularization, promotion, etc., concilia-
tion should be optional. The party should have the right to approach Labour Courts
and the Labour Relations Commission straightaway. However, conciliation should
be compulsory in case of industrial disputes related to interests—disputes involving
wages, allowances, fringe benefits, etc. Conciliation proceedings should also be com-
pulsory in the case of strikes and lockouts over any issue.
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Industrial disputes not settled in conciliation should go for either voluntary arbitra-
tion or mediation by arbitrators maintained by the Labour Relations Commission or
adjudication. In the case of essential services, the dispute should go for compulsory
arbitration. In other cases, it should go for adjudication. Arbitrators should be chosen
from eminent persons in industry, conciliators, trade unionists and labour judiciary.
All employing ministries should be advised to implement awards or sanction prose-
cution within one month of the matter being referred to them, failing which it should
be deemed that the sanction has been given.
Qualification of Presiding Officers:
Qualifications for the appointment of presiding officers of Labour Courts should be
relaxed to enable conciliation officers to be considered for the appointment.
Labour Courts should be given powers to issue decrees or initiate contempt proceed-
ings for non-implementation or non-compliance of awards.
Labour Relations Commission:
A central labour relations commission should be set up for central-sphere establish-
ments, and state labour relations commission should be set up for establishments in
the state sphere. Above the central and state labour relations commissions, there will
be the national labour relations commission to hear appeals against the decisions
of the two other commissions. The national LRC, central LRC and the state LRCs
will be autonomous and independent. These commissions will function as appellate
tribunals over the Labour Courts. They will be charged with the responsibility of
superintendence of the work of Labour Courts.
Voluntary Resolution of Disputes:
Voluntary resolution of disputes should be encouraged over legalistic approach of
settlement of disputes through adjudication.
There should be a legislative framework for voluntary dispute settlement. A basic
prerequisite is to place a system of recognition of negotiating agency on the statute.
The responsibility of conducting verification of trade-union membership for the rec-
ognition of trade unions should be vested in the central labour relations commission
and the state labour relations commission.
The works committee required to be constituted under Section 3 of the Industrial
Disputes Act should be substituted by an industrial relations committee to promote
in-house dispute settlement.
ILC:
The Indian Labour Conference should be an effective forum for review, consultation and
formulation or evolution of perspectives and policies. It must be made as representative
as possible. Some means must be found to include representatives from the unorga-
nized sector and from central organizations that are not affiliated to central trade-union
federations. The ILC can be used as a sounding board for proposals of legislations.
Suggested functions of the Indian Labour Conference would include review of labour
situation, consideration of conventions and recommendations of the ILO for adoption,
sounding board for legislative proposals, etc. The Standing Labour Committee should
prepare the agenda for ILC. There should be a Director General of the ILC having spe-
cific functions. The ILC should set up tripartite Standing Committees to consider and
review problems, legislations and implementation into main areas.
There are many other recommendations relating to areas such as safety and occupational
health, unorganized sector, infrastructure and competence and cadre-building of central and
state labour departments.
M16_SING6013_01_C16.indd 346 6/15/10 3:49:28 PM

SUMMARY
Labour administration refers to those parts of the govern- Labour policy of the government is forever evolving. The
ment machinery, to those public authorities, which are National Labour Policy is the outcome of deliberation of
directly concerned with the social and labour policy of a many bodies—the Vision of Founding Fathers conveyed
country. It also includes certain boards, institutes, centres through the Constitution, judicial pronouncements, plan
or other bodies that are not an integral part of government documents, ILO conventions ratified by the country and
machinery but to which the government has delegated cer- many other sources.
tain specific areas of labour and social policy.
The labour policy finds expression by way of legislation and
What used to be a government tool mainly for the prepara- execution of the same through administrative machinery.
tion and implementation of labour legislation and for the
The National Commission on Labour (2002) has recom-
settlement of labour disputes is gradually evolved into some-
mended many actions for strengthening the labour adminis-
thing much broader, extending its concern to employment
tration in the country.
policy, training, special problems of the unorganized, the
expansion of social-security schemes, and other matters.
KEY TERMS
Labour Administration 335 Labour Legislation 340 Labour Policy 334
REVIEW QUESTIONS
1 Discuss the scope and limitations of labour administration. 5 What role does ILO play in labour administration?
2 What is the role of labour administration in the formulation 6 Discuss the practicality of implementing the recommenda-
of labour policy? tions of NCL on labour administration. Why do you think
the government has not been able to implement any of the
3 What role does labour administration play in enforcing
major recommendations?
labour laws?
4 Discuss the role and functions of government machinery in

labour administration.

1 What, in your opinion, have been the substantive changes in 2 The existing framework of labour administration is grossly
the labour policy today as compared to the period just after inadequate to meet the challenges of today, considering that the
Independence? business and industry have transformed completely. Discuss.
D E B AT E
1 Legislative provisions with regard to labour have been inef-
fective on account of weak labour administration machinery.
Self-certification7 legislations, and vouchsafing that they are complying with the
law applicable to industrial establishments. This facility for self-
In the year 2002, the Government of Kerala asked the IT companies
certification would free the information technology companies from
operating in the state to file self-certified returns to the labour
routine inspections by the departments concerned. Only in the event
machinery in respect of compliances under various labour-related
M16_SING6013_01_C16.indd 347 6/15/10 3:49:29 PM

of any complaint about the flouting of the laws and regulations The general practice in the past was that after settling most
would an information technology company be inspected by the of the issues in-house, the management and the representa-
officials for verification. tives of the employees (with a letter of authority signed by
a majority of workmen) would approach the ALC only for
Questions:
signing the settlement in his presence so that the settlement
1. Discuss the pros and cons of this move by the Kerala became binding on all. The ALC would normally accept
government. Examine it from the points of view of the the list in good faith and help both the parties sign the
employer and the employees. settlement.
2. Why has the IT sector been singled out for this treatment? Do From time to time the factory management also kept the
you think this measure could be extended to the other sectors? office of the ALC in good humour whenever they needed
transportation, office supplies or other help. The ALC had
Undue Favours
a very large number of industries within his jurisdiction and
The Swastik Foundries Private Limited is a medium-sized steel the office had limited resources. It was always a tall ask for
foundry on the Delhi–Mathura Road, a few kilometres away his office to maintain a regular inspection visits to all these
from Faridabad (Haryana). It employs around 350 workmen industries. Often, even though it was improper, he was
and the foundry has been operating profitably ever since forced to depend on the management of these industries for
there was a boom in the steel industry since 2003–04. The resources.
employees had been putting pressure on the management
After signing the settlement, the disgruntled employees lodged
for a wage increase and an understanding had been reached
a complaint with the Labour Commissioner alleging that the
on a number of issues after a series of discussions with the
ALC had signed the settlement without proper verification of
representatives of the employees. A few issues still remained
the “representation” of the employees. They alleged that the
which the management thought could be settled with the
ALC had accepted undue “favours” from the management in
help of the Assistant Labour Commissioner who was also the
signing the settlement.
designated Conciliation Officer for the area. A few employees,
however, were opposed to the general understanding reached Questions:
in the discussions and were determined to oppose it. The
1. Is the complaint justified?
management had not recognized any union but was discussing
the issues with employees who claimed to represent majority. 2. What precautions could the ALC have taken here?
NOTES
1 International Labour Standards Concerning Labour 5 The Citizen’s Charter, Ministry of Labour & Employment,
Administration, Labour Administration Convention, 1978, Government of India (http://labour.nic.in/main/cit_charter.
Article 1 (a) and (b). htm)
2 Report of National Commission on Labour (2002), Chapter 6 NCL Report (2002), Volume 2 on Recommendations.
XI, Para 11.5, p. 3.
7 Government of Kerala, Labour and Rehabilitation
3 National Commission on Labour (2002) Report, Chapter XI, Department Notification No G.O.(Ms) No.55/2002/LBR
Para 11.8, p. 4. Dated, Thiruvananthapuram, 27th July, 2002; http://www.
kerala.gov.in/dept_labour/itenabledservices.pdf
4 ‘Ministry of Labour at a Glance in the New Millenium,
Government of India (http://labour.nic.in/glance/molglance.
html#ORGANISATIONAL)
SUGGESTED READING
1 Khan, Muinuddin (Ed.), Labour Administration: Profile on 3 Saini, D. S., Labour Administration: An Introduction (New
India (Bangkok: International Labour Organisation, Asian and Delhi: Oxford University, 1994).
Pacific Regional Centre for Labour Administration, June 1992)
4 Venkatratnam, C. S., Industrial Relations (New Delhi: Oxford
2 Report of Second National Commission on Labour, 2002, University Press, 2006).
M16_SING6013_01_C16.indd 348 6/15/10 3:49:29 PM

part iV
skills
M17_SING6013_01_C17.indd 349 6/15/10 3:52:44 PM

chapter seventeen
17.1 Conflict and Negotiations After going through this chapter, you will be
17.2 Negotiation able to:
17.3 Employee Relations and Negotiations • Understand the genesis of conflict situations
17.4 Integrative and Distributive Negotiation • Gain an understanding of different ways to
Strategies classify types of negotiations
17.5 The Basic Negotiation Process • Understand and explain the “process” of
17.6 Essential Skills negotiation and the steps involved in it
• Identify the knowledge, skills and attitudes
required for effectiveness in negotiations
• Understand the concept of integrative and
distributive outcomes of a negotiation
Due Diligence
Raghav Ahluwalia, Assistant Manager (Shift Operations—Electrical Maintenance), in a firm manufacturing wiring har-
ness for automobiles is in a hurry. He must allocate the jobs at the beginning of the shift and then rush to the office of the
Superintendent (Operations) for a meeting that the Superintendent wants to have with a group of electricians. Raghav
vaguely knows that overtime is the main topic that is to be discussed. Although he was informed of the meeting the earlier
day, he thought he need not make any special preparation since most of the facts were in his head and he knew all of the
electricians personally. The hostility, therefore, that he faced from his own employees when the meeting started took Raghav
by surprise. The electricians alleged that Raghav favoured a select few employees for overtime and was not fair in the alloca-
tion of duties. Knowing this not to be true (but unable to refute since he did not have data with him), Raghav quickly flared
up. Raghav was caught completely unawares as regards the issue and as regards the mood of the employees. The meeting,
thereafter, degenerated into an ugly exchange of name-calling, and facts involved in the issue flew out of the window. The
Superintendent some how pacified all of them and decided to hold the meeting the next day at the same time.
When the electricians left, the Superintendent asked Raghav why he had come unprepared for the meeting when he knew
the agenda. And being in charge of shift operations, how could he fail to keep track of the pulse of his people? He asked
Raghav to come the next day for the meeting fully prepared, especially with the following:
• Complete deployment chart for the last two months

• Employee-wise breakup of overtime payments made to the employees during the two-month period
• Rules regarding normal deployment and overtime deployment
• An assessment of what the electricians truly want
• Complete figures of the budgeted and actual costs at the shop floor
• An assessment of the opinion-makers amongst the electricians
• What, as a shop-floor-in-charge, are we willing to agree to without compromising on discipline
• Any other detail that he thinks they may need to discuss
• Our own demands from the electricians
M17_SING6013_01_C17.indd 350 6/15/10 3:52:45 PM

Negotiation Essentials
for Employee Relations
A “people’s manager” increases his/her effectiveness manifold by mastering negotiation skills, and examining
his/her basic attitude towards negotiation. Negotiation is rated as one of the key competencies required for
professionals, entrepreneurs and managers. The good news is that this is a learnable skill.
Raghav, like many of us, assumed that he would be able to handle any issue on the fly, based on his
experience and his competence. The meeting did not go as expected and ended on a worrisome
note. The situation escalated into something that, perhaps, neither party wanted. Yet, both of them
had reached a place neither of them wanted to! Instead of solving a problem, both parties ended up
making the problem even more complicated, a situation that may require even more time and energy
to solve than it would have required that day. And, more importantly, Raghav may now carry a
defensive attitude towards the meeting the next day, and also a feeling of concealed hostility towards
the electricians. This may complicate issues further. Because of a lack of proper appreciation of the
subtleties, a seemingly solvable problem became even more complicated.
Conflict and negotiations are what we face every day. What some of us do not do is to examine
our attitudes towards conflicts and realize that every negotiating situation may involve understand-
ing of issues, root cause(s), preparation and skills. More so, as an HRM professional (or aspiring to
be one), this competence may differentiate a mediocre from the brilliant.
For Raghav’s sake, therefore, let us examine these two inter-related concepts in a bit more
detail.
17.1 Conflict and Negotiations

Conflict is as natural a part of our lives as learning. However, the word “conflict” has taken a negative
connotation and subconsciously, majority of us believe that it is something best avoided, brushed
under the carpet or, if inevitable, done away with as quickly as possible. However, if we reflect for a
moment, we will realize that:
Conflict is a necessary part of human life. We can avoid it but cannot wish it away. Conflict is
a reality that must be accepted.
All conflict is not “bad”. “How” we resolve the conflicts determine the value of the outcome.
Sometimes, a conflict may become “dysfunctional”, in which case, the outcome may be harm-
ful to the parties to the conflict. The negative connotation to conflict probably has its origins
in these dysfunctional conflicts. The lack of skills and understanding results in the formation
of a vicious circle.
Successful resolution of conflict is the way to progress. If we view “conflict” as a “problem”,
then successful solution to that problem will certainly result in progress.
As a “people’s manager” (or any other manager), a substantial part of our energy will be nec-
essarily directed towards conflicts. Competence to successfully resolve conflicts, therefore, is
a sine quo non for an effective “people’s manager”.
M17_SING6013_01_C17.indd 351 6/15/10 3:52:46 PM

352 Part IV Skills
B Before we proceed, it is obligatory on our part to define what a “conflict” is. And since the
Conflict is a necessary
part of human life. b book has a practical focus, we will restrict ourselves to an operational definition of a con-
The manner of resolv- flict and not go into details that have perhaps been discussed in text books on organization
ing a conflict deter- b behaviour.
mines the value of the Conflict is about perception. When two persons (or groups) look at an issue from their
outcome. o own perspectives (because of a large number of reasons, ranging from inadequate commu-
A conflict may become n nication, roles, organizational structure, personality, different emotional states, etc.) and the
“dysfunctional”, harm- tthere is a difference in the two perspectives, then there is an existence of a “potential” conflict
ing the parties.
ssituation. Actual conflict may not have surfaced at this stage, but the conditions for one aris-
The lack of skills and
understanding results iing are there. The moment one person (or group) acknowledges that the difference in percep-
in the formation of a ttion of the other person (or group) is going to negatively affect the interests of the first person
vicious circle. ((or group), a conflict surfaces.1
Conflict, when viewed The important things to keep in mind, at this stage, would be:
as a “problem-solving
exercise”, will result in That different people (or groups), most likely, will have a different perception of an
progress when solved. issue.
Competence to
successfully resolve The difference in this perception could be due to variables such as different goals,
conflicts is a sine quo roles, individual level variables, emotional state, clarity of communication, etc. It is a
non for an effective near impossibility to have congruence on all the variables.
“people’s manager”.
The difference in perceptions is a necessary condition for a potential conflict, not a
sufficient one.
Conflict will arise only when either party believes that this difference may be prejudi-
When a person (or a cial to their interests.
group) acknowledges that
differences in perception Before a difference takes the shape of conflict, there is a window of opportunity as to
of the other person (or how the two parties frame the issues regarding the different perspectives.
group) is going to nega-
tively affect the interests of TTo be an effective negotiator, it is essential to understand what a negotiation is all about. And
the first person (or group), tthe starting point would be to check our understanding of conflict itself. This may shape the
a conflict surfaces.
aall-important attitude towards conflict and negotiation (see Box 17.1).
17.1.1 Approaches to Resolve Conflict

1
The books on organizational behaviour have dealt with various approaches to resolving
conflicts. The basic approach, however, is dependent to a large extent towards our attitude
towards conflict itself. From an employee relations point of view, we would sum up the vari-
ous
o approaches under two broad categories, namely:
There are two basic Avoidance
“attitudes” to solving a
conflict, “avoidance” and Approach
“approach”. “Approach”
means that more often People
P approach a conflict situation with the above basic approaches. These approaches are
than not, individuals with based,
b mostly, on the basic attitude that we hold towards conflict. The “approach” attitude
this attitude would like to means
m more often than not we would like to resolve the conflict (or problem) by approach-
confront (or approach)
the problem to solve it. ing
i the problem and solving it. The “avoidance” approach, on the other hand, may lead us
“Avoidance”, as the to
t resolve the conflict, more often than not, by avoiding the conflict situation. Of course,
name suggests, means the
t approaches depend on many situational factors and, in many situations, the “avoidance”
that individuals avoid the approach
a may be the better option. More often, however, it is the attitude of “approach”
conflicting situation as a that
t is more effective in most situations. A persistent pattern of avoidance points to certain
means of solving it.
lacunae,
l which may be rooted in fear or lack of confidence in the ability to solve a problem.
We
W need to, therefore, find out our basic approach towards the resolution of conflicts and
to examine the basic competence that may be required to resolve conflicts, and then evalu-
ate whether it is effective or needs a deeper examination. Such instruments are available in
many books on organization behaviour. Many times, if we reflect on our own experiences at
problem-solving, we may, with fair accuracy, determine our dominant preference for resolv-
ing a conflict.
M17_SING6013_01_C17.indd 352 6/15/10 3:52:46 PM

Negotiation Essentials for Employee Relations 353

Mantosh is a lathe operator, Gr-II, in the machining shop of an automobile-manufacturing
company. Due to increasing pressure for operational efficiency in a fiercely competitive
market, the management is continuously striving to increase the availability of manpower
on the shop floor. Unplanned leave is discouraged. The annual leave calendar is planned
in advance to ensure that the process does not suffer for want of availability of skilled
manpower. Mantosh, like other workmen, has a creditable attendance record but of late,
due to increasing pressure at home front (his son is to take the plus-2 exam in the com-
ing year, and the marriage of his daughter has been fixed). Although he had planned for
leave to be with his son during the period nearing his exam, he had not provided for his
daughter’s marriage. Knowing the process of taking leave, he was apprehensive that the
supervisor may refuse to grant him leave for as long as he required (around three weeks).
This anticipation was causing anxiety and mild negative feeling towards the supervisor/
company policies. Mantosh sought a meeting with his supervisor.
When Mantosh narrated the issue to his supervisor, the supervisor took some time to
think. He, then, said:
1. Daughter’s marriage is very important for the girl’s father. No questions about it.
2. Your presence for the smooth conduct of marriage is an absolute must. No
questions.
3. We must, therefore, find a workable solution.
The supervisor paused and then asked if Mantosh agreed. Mantosh was relieved, and
readily accepted the statement of the problem.
The supervisor then posed that the issue before them was to find a solution where
Mantosh could be present for the marriage with the following proviso:
1. This should cause minimal or no disruption of work.
2. This should not affect the discipline at the shop floor and quoted as precedent for
granting unplanned leave to others. Perceived equity is important.
The supervisor paused again and asked Mantosh if they have defined the problem
correctly.
What, do you think, will happen here? What did the supervisor do? In how many dif-
ferent ways could this conversation have gone and with what consequences? Even though
there is a conflict here, has the “framing of issues” been done properly? Will it result in a
constructive search for a solution? What would have happened had the supervisor used
his “authority” and refused point blank citing company policy? What if he had accom-
modated Mantosh’s request completely? Do you think that by framing of issues, chances
of a solution to the satisfaction of both have increased?
Box 17.2 describes typical situations that people face in their work lives. Similar situations
occur in our daily lives too. All these situations describe a problem or a conflict and differ-
ent ways that have been used in each to resolve the conflict or the problem. Most of us use Based on the “attitudes”
a mix of these approaches in different situations. However, we may sometimes adopt one or of “avoidance” and
“approach”, following
two of these ways as predominant ways of handling the conflicts/problems that we face in styles may be adopted in
life. Sensitizing ourselves to a variety of ways to approach a conflict and our own predisposi- different situations:
tion towards it may be the starting point of our exploration of knowledge, skills and attitude
Resignation
required for effective conflict resolution and negotiations.
Avoidance
Resignation: Tapasya has pre-judged the demands of the situation and her own abilities
De-fusion
(or the lack of them) to meet them. Analysing the situational factors, Tapasya has determined
Compromise
that there is no way she could resolve the conflict effectively in her favour and, therefore,
Problem-solving or
accepts the probable outcome as a fait accompli. She has resigned to the “fact” that she can- Negotiation
not do anything to influence the situation and, therefore, is willing to accept the outcome, Confrontation
whatever they may be.
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1. Tapasya Roongta has just taken over as a regional training manager with one of
the largest telcos in the country. There is a budget meeting to be held today for
the HRM function of which training is a part. Because of intense demand on the
training function, there is a pressure on Tapasya to meet the annual targets. There
would be need to seek substantial increase in budget provisions for her function.
However, Tapasya feels that her being the only woman sectional head in the HRM
team puts her at a disadvantage. In the past, her seeking support has met with little
response. Her being new to the position too adds to the disadvantage, she feels.
There would be little point in her making efforts to get the budget allocation that
she wants, since in all probability, it will be rejected. Tapasya decides not to expend
her energy in a lost cause and keeps quiet during the meeting.
2. Radhe Shyam, an associate working with a BPO Gurgaon, came late to office
for two days in the last week. Abhay Mazumdar, the supervisor of Radhe Shyam
noticed this late-coming on both the days. He was in two minds, whether to call
Radhe Shyam and ask him why he was late, or may be not to bother! Every one is
entitled to come late once in a while. Let it go for the time being. He will intervene
if this becomes a problem. Any way, the moment he will ask, Radhe Shyam may
flare up and create a scene. Asking him may not be worth the trouble.
3. Ravikesh Shrivastava, the programme director for a management course in one
of the premier B-schools was aghast when few students entered his room in a very
agitated mood. They had a whole list of grievances regarding the seating arrange-
ment, ventilation in the classroom, non-availability of books in the library, and
finally very unhygienic conditions in the canteen. They wanted the issues resolved
right then or they threatened to march to the room of the CEO. Alarmed, Ravikesh
asked them to sit down, tell everything in a calm manner and then give
him 48 hours to revert to them. After stating the whole thing, the students left and
Ravikesh heaved a sigh of relief and patted himself on the back for defusing a poten-
tially ugly situation. The next day, the students may most likely be out of steam and
the situation may resolve itself or may require minimal interference from his side.
4. Bimal Bhasin, a team leader with Software Solutions limited, has been called by his
project manager for a planned Performance Review Meeting. Despite the high-sounding
name, Bimal knows what these meetings are all about. These meetings are about hag-
gling target dates for the various milestones of the ongoing Macrosoft projects. Bimal
can either discuss each of the milestones threadbare, or quickly settle the whole issue
by tactically accepting a few milestones that he thinks are important for his boss (but
whose feasibility is not certain) and make the boss relax a bit on the other milestones in
lieu of his accepting the critical ones. While this may not be the most effective solution,
it will at least save time and keep both of them reasonably satisfied.
5. Tarika Chopra is the front-desk executive at the Miramar Hospital. She considers her-
self very efficient and is prompt with her service to patients, replying to their queries,
directing them to the appropriate section of the hospital, etc. There have been no
complaints against her so far. The Lobby Manager, while strolling in the lobby, saw
Tarika’s table unmanned. He immediately had her paged and after 10 minutes, Tarika
reported to the Lobby Manager. The Lobby Manager read her the riot act, telling her
in no uncertain terms that her desk should be “manned”, “all the time”. Tarika meekly
mumbled that she had taken a 10-minute toilet break to which the Lobby Manager
replied that appropriate breaks are built into the duty hours, and there is no provision
for unscheduled breaks. Tarika went back to her desk full of resentment.
Do these hypothetical situations remind you of similar situations that you face in everyday
worklife? Would you handle such hypothetical situations in the same ways? Could there be
alternative ways? Each of these situations highlights a distinct approach. Can you try and
identify what these approaches are, especially on the approach-avoidance dimension?
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Avoidance: Abhay Mazumdar, for example, has decided not to confront the problem but to
ignore (avoid) it since, in his opinion, the cost of confrontation may not be worth the benefit
arising out of such confrontation. Abhay may be right, but could it also be that for Abhay, get-
ting into an unpleasant situation is uncomfortable? If that be the case, may this not develop
into a pattern and the “preferred approach” for handling potential conflict? In certain situ-
ations, avoiding the situation may be the best approach, but it may not be so all the time or
even most of the time. Why? Because, avoiding a conflict does not solve it. At best, Abhay
has postponed the immediate show down. The problem may come back later to haunt Abhay,
with greater intensity. Remember the “hot stove” principles of maintaining discipline? Every
act of indiscipline must be confronted as soon as practicable!
De-fusion: Ravikesh has been able to take out the sting from the situation. His focus was to
postpone the problem so that the emotional content becomes manageable. The conflict has
not been resolved. It has not been addressed rather. For the time being, however, the conflict
has been shifted with the hope that gaining time may help resolve the problem later (if the
problem does not disappear of its own). This approach may be very useful some times. But is
it always so? Or, does it even happen most of the time? It is a fact that problems or conflicts
don’t vanish with time. For the present, they may go under the surface to emerge later in
another form. What Ravikesh has used is called “de-fusion”. The crisis or the problem has
been defused for the present. Ravikesh will cross the bridge when he comes to it, no sooner.
Compromise: Bimal has decided that keeping both parties happy is more important for him
than discussing the issues threadbare and arriving at the best possible solution. Give and take
and be happy and the problem be dammed! Well, as we noted earlier, both parties may leave
with some face-saving and satisfaction at not having lost everything, the problem remained
largely unaddressed. Bimal has decided to “compromise”, an outcome in which we win some,
and we lose some, but the deadlock is broken. Some progress is better than no progress or
one-sided progress.
Engagement or Problem-solving: In the example of Mantosh, the lathe operator, the boss
has listened to Mantosh and tried to bring all the issues to the fore and got an agreement of
both the parties on the statement of problem. The intent, thereafter, is to arrive at a mutually
satisfying solution.
Confrontation: In direct contrast, Tarika’s boss has confronted the situation head on. He
did not flinch from calling a spade a spade. There was no need for him to look for mitigating
factors where everything was in white and black. He used his positional power to “resolve”
the issue. In all likelihood, Tarika would be very careful in leaving her duty post. But, if you
reflect for a moment, do you think the resolution was resolved to Tarika’s satisfaction? What
would Tarika do with her simmering resentment? Could this cause a problem in future? Was
there a better way to confront the issue head on so that Tarika did not leave with as much
resentment, and at the same time, her boss made it a point to let her know that her absence
had been noticed?
Figure 17.1 gives an idea of various approaches that people adopt in handling conflicts
or potential conflict situations that they face. The approaches have been mapped along the
approach avoidance continuum. Each of these are not discrete approaches, but often there
Figure 17.1
Defusion Avoidance Resignation
The Approach–Avoidance
continuum.
Approach
Avoidance
Confrontation Engaging Compromise
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356 Part IV Skills
is a subtle blend of various approaches with one of them being the dominant and the pre-
ferred one in a majority of conflict situations. It is important to know one’s fundamental
orientation to viewing and handling conflicts. Sensitizing oneself to this may be the first,
and in the opinion of others, one of the most important steps in viewing conflicts in a proper
perspective.
Conflicts will remain as long as humanity. It makes sense to acquire necessary com-
petence to effectively handle conflicts. It is important to understand that any one of the
above approaches may not be the best approach in all situations. Like an experienced
golfer, however, we must learn to recognize the different terrain where shots are taken,
and to match the appropriate club to each terrain. It is futile to “confront” the boss when
you find that he has “lost it”. It is better to avoid him at this moment and wait for a more
opportune time. It will be harmful for you to “avoid” a conflict when you witness an act of
indiscipline.
17.1.2 The Dual Concern Model of Conflict Resolution

Contemporary theorists provide another useful framework in which to view the resolution of
conflicts meaningfully2. They classify the approaches based on two dimensions namely:
Cooperativeness (or, concern for others)
Assertiveness (or, concern for self)
Based on these two dimensions, we can visualize the conflict resolution behaviours or
approaches in five categories as shown in Fig. 17.2. Notice that it is more or less similar to
the approaches that we discussed in the text above. Sometimes, these five categories are also
referred to as negotiating styles or negotiating behaviours, depending upon the context in
which these are being discussed. These five categorization, prior to the actual discussion, may
be viewed as the “intent”, whereas during the discussion, these may be referred to as styles or
behaviours. Remember that intent does not always translate into behaviour.
Figure 17.2
Assertiveness
The dual concern model.
Source: Adapted from
Dan Pruitt, “Strategic
Choice in Negotiation”, High
in Jefrey Z Lubins. (ed.),
Negotiation Theory and
Practice (Cambridge,
MA: Harvard Law School Competing Collaborating
Program on Negotiation,
1991), pp. 27–46.
Compromising
Avoiding Accommodating
Low High
Cooperativeness
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17.1.3 Is “Conflict” Desirable?

We have now gained a perspective on conflict from different angles. But another question
remains, which may have a bearing on our fundamental orientation towards conflicts. Can
“conflict” serve any useful purpose? Should we encourage “conflict” or discourage it? What is
more likely to yield an effective solution—a uniform view on the problem or a diverse view
on the problem? Is it possible that the richer the “data” on a problem, more the chances of
finding an effective solution? What is better for an organization—a homogenous group of
employees or a diverse group?
Once we accept “conflict” as a fact of life, then the right question to ask, perhaps,
is not whether conflict is good or bad for the organization, but whether the outcome of
conflict resolution is effective or ineffective or, whether the outcomes of the conflict are
functional or dysfunctional for the organization. More and more research is pointing out
that the presence of conflict is desirable in an organization. Our substantial experience
in employee relations makes us believe that absence of conflict in an organization may be
symptomatic of decay. In Chapter 12, it had been mentioned that the slate of industrial
relations is never “clean”, and, within limits, this may be desirable. Research also indi-
cates that diversity in a team or an organization has the potential to give more effective
solutions.
Conflict is constructive when it improves the quality of decisions, stimulates creativ-
ity and innovation, encourages interest or curiosity among members, provides the medium
through which problems can be aired and tension released, and fosters an environment of
self-evaluation and change.3
Many organizations, today, make efforts to create functional conflicts within the organi-
zation. It is believed that in today’s fiercely competitive business organizations, the presence
of functional conflict and also the competence to ensure that outcomes of conflicts remain
functional are critical. And that competence is what we call “negotiation”.
17.2 Negotiation
The run up to this point has been to prepare you to smoothly slip into the domain of
negotiations from the area of conflict. With the above background on conflict, we are
now ready to look at negotiations. What then, you may ask, is negotiation? Is it not the
same as “compromise”? Is it not “give and take”? What has negotiation to do with day-
to-day work of employee relations? Does negotiation not only take place during com-
mercial deals or with trade unions or international treaties? Is it always necessary to
negotiate to resolve a conflict? Is there a “best way” to negotiate? Can good negotiation
be learned? Are some people inherently effective as negotiators? In the rest of the chap-
ter, we shall attempt to answer a few of these questions, once again, from a practising Negotiation
manager’s standpoint. Negotiation is “a process
Researchers and scholars, who have studied negotiation, have all defined negotiations in which two or more
differently. From a managerial perspective, negotiation is the competence that is required parties exchange goods
to resolve conflicts or solve people-related problems. We may put very crudely that while or services and attempt
to agree on the exchange
conflict may be a situation, negotiation is the art and science of resolving those conflicts. The rate for them”. Another
“approaches” to conflict that we studied earlier in this chapter can also be seen as approaches simple definition may
to negotiation. From a theoretical point of view, one of the broadest definitions of negotiation be “a way to resolve
has been proposed as “a process in which two or more parties exchange goods or services issues without resorting
and attempt to agree on the exchange rate for them”.4 Another simple definition that has been to actions that hurt or
proposed is “a way to resolve issues without resorting to actions that hurt or destroy relation- destroy relationships”.
ships”. Not every interaction between two parties is a negotiation. However, every negotia-
tion requires an interaction between at least two parties who have a relationship and who are
motivated to negotiate. That is, each party must need or at least perceive that he or she wants
or needs something that the other party has or controls. Furthermore, both parties must be
able to propose options, make decisions and deliver on their agreement. 5 Negotiation, there-
fore, has the following features:
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358 Part IV Skills
1. Two or more parties

2. Something of value or interest to the parties
3. Desire to engage in interaction
4. At least some desire to accommodate
5. Authority to honour the agreement/settlement
17.3 Employee Relations and Negotiations

In Box 17.2, various situations have been mentioned. All these situations required negotiation.
However, when we think of negotiation in the context of employee relations, the picture that read-
ily comes to mind is that of union–management negotiations. However, this function involves
a wide variety of situations requiring negotiations, ranging from structured to unstructured,
formal to informal, one-to-one versus team negotiations, dispute resolution to wage settlement.
17.3.1 Situations Requiring Negotiation

Let us take a look at some of the specific situations that may require negotiations. This list is
not exhaustive and, also, it may vary with the nature, culture and practices followed in the
organizations.
Informal Situations:
Allocation of work
Problem-solving meetings
Target-setting
Performance counselling
One-to-one discipline meetings
Routine meetings with employees or their representatives
Bipartite committee meetings (canteen committee, sports committee)
Formal Situations
Performance-review discussion
Appraisal interviews
Selection interviews
Budgetary meetings
Agenda-based meetings with unions or employees
Grievance meetings
Works committee meetings
Joint council meetings
Pre-decided bipartite meetings
Unstructured Situations
Problem-solving meetings
Target-setting
Performance counselling
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Grievance meetings
One-to-one discipline meetings
Routine meetings with employees or their representatives
Bipartite committee meetings (canteen committee, sports committee, etc.)
Structured Situations
Performance-review discussion
Appraisal interviews
Selection interviews
Budgetary meetings
Agenda-based meetings with unions or employees
Works committee meetings
Joint council meetings
Pre-decided bipartite meetings
In fact, in the area of employee relations, it is difficult to imagine an activity that does not
require negotiations. You can try and imagine the various activities that you perform and try
to identify a few that do not require at least some negotiations. The competence for effec-
tive negotiation, therefore, becomes the differentiator for a people’s manager. It is important
to know the process and skill requirement for an effective negotiation. To approach in an
orderly way, it may be useful to use some mental classification, since each may require a dif-
ferent approach and style.
The case in Box 17.3 illustrates the point that preparation for a negotiations meeting
must take into account the nature of the meeting. As we will learn later, preparation is one
of the most significant steps in the negotiations process. And an assessment of the negotiat-
ing situation is one input that must be considered while preparing. Just like in the chapter-
opening case, this case also ignores the effort needed to prepare for the negotiation. What, in
your view, would be the outcome of this meeting?
17.4 Integrative and Distributive Negotiation

Strategies
How do we decide to bargain? Is it maximizing our own gains from a fixed pool of resources?
We are, after all, in the negotiations to ensure that we get the maximum. How does it mat-
ter that every rupee that we gain is at the cost of the other party? Negotiation, after all, is a
game of power, and yielding any ground to the other party may be seen as a sign of weakness.
The whole strategy, therefore, must be focused towards taking as much from the kitty as we
can. An example of this kind of negotiation could be a wage negotiation. The firm has fixed
resources. The labour may like to negotiate as much from it as they can. The more they can
manage to take, the more will it add to the income of the members. Management, on the
other hand, would like to give as less as they can manage and, thus, save on costs. The gain
of one will be a loss to the other. This is what we call the classical zero-sum game. The gain
and the loss add up to zero. This is the win-lose bargaining. One party wins at the cost of the
other. This kind of bargaining is termed “distributive bargaining” (also sometimes known as
“pure bargaining”). Both parties view their own goals to be in direct conflict with those of
the other side. In this strategy, it is important to decide one’s BATNA (best alternative to no
agreement). This means, prior to entering into negotiation, the party must decide what the
minimum gain that they would settle for is. Below this point, it would be better not to have a
settlement. This point is also known as a reservation point as is shown below in Figure 17.3.
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360 Part IV Skills

Amandeep Grover, Manager (HR) in a specialty chemical firm, manufacturing refriger-
ant gases, had called his Assistant Manager for a Performance Review Discussion. The
Performance Review Discussion was an elaborate process and an essential component of
the company’s Performance Management System. Amandeep had been involved in the
development of the PMS and had also been part of the team that trained the other man-
agers of the company in its use. The Performance Review Discussion was a formal process
where the boss and the subordinate jointly reviewed the performance of the previous year,
discuss shortfalls, agree upon strengths and weaknesses and identified the training and
development needs. At the end of the review, both are supposed to discuss next year’s plan
and arrive at a mutually agreed set of objectives, tasks and targets. The whole process, if
done faithfully, takes about an hour’s time. Although that day’s meeting had been fixed in
advance, Amandeep thought he would be able to handle it because of his long experience
and thorough knowledge of the system. Moreover, he thought, he knew his subordinates
well and had kept a tab of their performances throughout the year. There should be no
difficulty in making his subordinate agree to the performance targets that Amandeep had
in mind. He was busy attending a phone call when the Assistant Manager walked in with a
bunch of typed statements and his “performance diary”. After finishing his call, Amandeep
asked his subordinate to start speaking, while he (Amandeep) started looking at his mail
box. Having finished looking at the mail box, he asked the subordinate to stop and “told”
him the targets that had come from the Head (Corporate HR) and, consequently his targets
have been formulated accordingly. The Assistant Manager listened to Amandeep quietly
and then said, “Boss, it seems you have not been listening to me. I had come prepared for
the meeting and had hoped to go through the process systematically. However, since you
asked me, I started explaining my achievements and shortfalls, for which I had brought
along all supporting documents. I feel by passing on the targets to me, you have not
given any heed to the difficulties that I have been trying to explain to you. If you pass on
these targets without even going through the process, then it may not be possible for me
to accept. I cannot accept something that I cannot deliver. Sorry.” Amandeep was irritated
and told his subordinate not to educate him on the “process”, and that it was he who had
been one of the architects of the new PMS. The Assistant Manager kept quiet thereafter,
and did not participate in the target-setting exercise.
People have “expectations” from the process, if the process has been defined. The
PRD is a structured process and a formal process, and, thus, it may create an expectation.
The outcome of this process has to be recorded. If, in the beginning itself, the expectations
of one party are belied, the outcome may lack commitment of both parties.
Another kind of bargaining that is fast gaining ground is what is called “integrative
bargaining”. This bargaining strategy is especially relevant in complex situations involving
many issues, and where the long-term relationship between the parties is important. This
approach emerged out of management–union negotiations, where long-term relationships
Figure 17.3
A’s Target B’s BATNA A’s BATNA
Distributive bargaining
and BATNA.
B’s Target
Settlement Range
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are important. In fact, in most of the areas in employee relations, it is the integrative bar-
Distributive bargaining
gaining that finds favour. The concept here is to work towards a win-win solution. The involves distributing a
gain or loss need not be at the cost of another party; rather, the strategy is that of joint pie of fixed size; the gain
problem-solving (JPS), where, if need be, the size of the pie itself can be increased so that of one is at the cost of
both parties get a feeling that they have got what they wanted. Both parties collaborate another. It is a win-
to find a mutually satisfying solution. A typical example would be the labour agreeing to lose game. Integrative
bargaining, on the other
increase productivity so that they are able to get a wage increase that their members would hand, tries to find a mutu-
want. Under the distributive bargaining, both management and labour would have fought ally satisfying solution
for the largest piece of a fixed pie. The case of Mantosh, the lathe operator, is a case in point through joint problem
where both the parties have jointly identified the problem and agreed to find a mutually solving, if need be, by
satisfying solution. Notice that the solution may go beyond the mere adherence to rules increasing the size of the
pie itself.
and practices. Both parties have defined the objectives and identified the constraints. The
endeavour now would be to find more than one solution to the problem (unlike the dis-
tributive bargaining that could have ensued had each party stuck to their stands, one of
them winning at the cost of another).
In real life, the strategies are not cut and dried. Often, one has to employ a mix of strate-
gies in most of the situations because the other party may not be using your strategy, or at BATNA
some stage of negotiation, it may become necessary to make a tactical change. Best Alternative to No
Distributive bargaining can be employed where the relationship is not very important, for Agreement (BATNA)
example, one-off situations involving parties we are not likely to deal with again. Bargaining means, prior to entering
into negotiation, the party
for best price of a product in a shop may be one such situation. Distributive bargaining is
must decide what is the
based on “power”, whereas integrative bargaining is based on cooperation. Many negotiators minimum gain that they
use this strategy, so one must be prepared to use this strategy too. Integrative Bargaining is would settle for. Below this
possible only if both parties are prepared to use it. point, it would be better
Integrative bargaining is especially useful in complex cases involving a large number of not to have a settlement.
This point is also known
issues. Instead of looking at one issue at a time sequentially and closing it (based on individ-
as a reservation point.
ual BATNAS), integrative bargaining looks at issues in totality and arrives at many possible
settlements. A structured approach in these cases is to prioritize and classify issues that may
be termed as vital, must-have, nice-to-have or trivial/ tradable, etc. and then take each block
at a time. To establish goodwill and set the tone for joint problem-solving, probably it may be
a good idea to settle one or two trivial issues.
Table 17.1 gives the difference between integrative and distributive bargaining. (Note:
Although there is a subtle difference, we have used the terms “negotiation” and “bargaining”
interchangeably).
Table 17.1
Factor Distributive Bargaining Integrative Bargaining
The difference between
Number of One (or with several issues, one Several distributive and integrative
Issues at a time) bargaining. Reproduced
with permission from
Technique Win-Lose Win-Win Michael R. Carrell
and Christina Heavrin,
General Maximize share of a fixed pie Expand the pie by creating “Integrative Bargaining”,
in Negotiating Essentials:
Strategy value and claiming a share
Theory, Skills and
Relationship One time only Continuing, long term Practice (Delhi: Pearson
Education, 2008),
Interests Keep interests hidden Share interests with other party p. 97.
Possible One expressed option (one for Many options—create new

Options each issue) options for maximum mutual
gain
Information Keep information hidden Share information with other
party
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362 Part IV Skills
17.5 The Basic Negotiation Process

There are as many process outlines for negotiations as there are books. More or less, however,
identify the following as the major processes involved in the negotiations process:
Preparation
䊊 Define issues
䊊 Set objectives
䊊 Formulate BATNA
䊊 Analyse situation
䊊 Plan strategy
Opening
䊊 Set ground rules
䊊 Initial offer
䊊 Decide on approach
Bargaining
䊊 Implement strategy
䊊 Observe strategy
䊊 Analyse and reorient strategy, if needed
Closing
䊊 Check coverage
䊊 Document
䊊 Get an agreement
For simpler negotiations (informal), the logical flow would be similar, but many of the above
steps may either not be required or get merged with other steps.
17.5.1 Preparation
Preparation is perhaps the most crucial but least cared for part of the negotiation process.
In fact, maximum time and effort must be devoted to this phase, as the foundation for a
successful negotiation depends to a very large extent on this phase. Refer to the chapter-
opening case. How would have Raghav fared with the negotiation had he prepared along the
lines suggested by his boss? Apart from getting a good grip on what lies ahead, a thorough
preparation also gives confidence, which shows during the actual negotiation. It acts as a
framework against which to evaluate progress towards the achievement of goals. Preparation
would include investigation and clarity on the following:
Issues
What are you negotiating about?
What are the key issues?
Set aside the issues that have already been decided.
Ask where and how your issues conflict and coincide.
(The answer to these questions will have a major impact on strategy)
Objectives
What are the essential, desirable and tradable objectives?
What would be the BATNA (for each objective and for all the issues taken together?)
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Analyse Situation
How important is long-term relationship?
Should we negotiate in team?
If yes, who would be the members and what would be their roles?
Even with scant information, estimate of their objective.
The power balance (alternative suppliers, etc.).
Who needs the deal more?
Personality, political situation, probable strategy, to the extent available
Decide on IB (JPS) or DB (PB).
Strategy
Emphasize early tasks (atmospherics, communicating initial position, learning their
position).
Whether or not you will make the first offer
Your initial offer—what or how much? What atmosphere do you want? Where will be your
concession?
Support arguments for each of the objectives.
What-if analyses
With this kind of preparation, you can imagine how much could be accomplished even before
the negotiation has started. The negotiator will feel a sense of control that will be refl ected in
the actual negotiation process.
17.5.2 Opening
Opening must set the tone of the process. Depending upon the strategy (JPS or PB), the
atmospherics may be different. One must take into account past relationships, the relative
power balance, issues at hand before making an opening. This is also the time to agree upon
the ground rules like who would be the spokesperson, how long will each discussion last,
how frequently breaks would be taken, form of final agreement (verbal or written). This,
perhaps, is also an opportunity to assess what strategy the other party favours, and tailor
one’s own strategy accordingly. In management–union relations, this is also the time for the
unions to play to their constituencies. This is the time when there may be outbursts due to
past irritants and also a gambit for demonstrating power. One should expect this and keep
one’s cool, as most likely, this would pass after running its course. This is primarily “postur-
ing” and may serve a useful purpose as a safety valve for pent-up emotions.
Whether or not one is transparent in putting forth the issues is a matter of assessment
and strategy. There are proponents of both the views, each with relative advantages and
disadvantages.
In a formal union–management meeting, there is a tendency for the representatives
to be present in large numbers. While this may be necessary from the union’s point of
view, it is not always conducive to speedy closure of issues. In fact, the inability to properly
address this issue sometimes derails the whole discussion. It is desirable for both parties
to have a prior discussion with a smaller group from both sides. In a multi-union situ-
ation, the group size often gets unwieldy and attention must be paid for the creation of
a shadow negotiation team that meets separately from time to time, and then reports to
the larger group, and then participates in the discussion. This arrangement helps steer the
negotiation towards the desired end. In a union–management meeting, it is important for
the management not to “gloat” over minor “victories” and allow the union to take the lead
in announcing the progress to their constituents. It will be very wise to remember that
negotiators representing their constituencies have to sell the settlement to their constitu-
encies and provide them some leeway in taking lead in communicating the progress to the
larger group.
Opening gambit sets the tone. In a union–management meeting, it is expected that after
theatrics, both parties will get down to the business of negotiating. Both parties need each
other in the long run.
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364 Part IV Skills
17.5.3 Bargaining
It is the tactical heart of the negotiation process, the penultimate step before the closure.
It is here that the parties get to the substantive issues and try to narrow down their differ-
ences. This is not a straight process, but there may be many cyclical rounds. Negotiations
involving large and complex issues may have many mini-negotiation processes during
the bargaining phase. It is here that the two parties engage in pure bargaining or joint
problem-solving. Literature on negotiations suggests many tactics that are deployed to
settle issues, especially in pure bargaining situation. In integrative bargaining, efforts are
on to forge agreements on smaller issues thus strengthening the movement towards final
settlement. Tradable objectives may get exchanged for desirable objectives or essential
objectives.
It is at this stage that the negotiator must be aware of their BATNA. BATNA must be
determined “before” entering into negotiations. BATNA will prevent us from coming to a
sub-standard deal. Many times, the negotiators get emotionally involved with the process,
having invested time and energy, that they may ignore their BATNA for a chance at closure.
It should be absolutely clear that one should not have a deal below the BATNA and be ready
to end the negotiation rather than accept something else. Normally, even if the situation
changes during the negotiations or sops are offered, the pre-determined BATNA should not
change.
17.5.4 Closing
This is the final step when the end is in sight—all major issues have been settled and minor
ones remain. This is the time for drafting the terms of settlement and see if any points have
been left out. A written document is not necessary as there is no binding, but it is advisable
to document everything in as much detail as possible, taking care to mention dates when
various provisions would take effect, period of validity, method of resolving issues, relation
to interpretation of provisions, method of terminating the provisions, etc. In labour–
management negotiations, the period for which the settlement will be valid must be men-
tioned clearly, as also what the status of the provisions on expiry of the period of settlement
or premature termination would be.
Once again, under Indian conditions, in relation to labour–management settlement,
largely it is advisable to go for a tripartite settlement, i.e., through the good offices of a concilia-
tion officer. However, the pros and cons of doing so should be carefully examined before taking
a final decision.
17.6 Essential Skills

As we have seen above, negotiation appears to be a complex process. It involves almost all
the soft skills, from listening, verbal and non-verbal communication, awareness of one’s
emotional state, ability to think clearly in highly emotional situations, ability to work under
pressure and ability to withstand pressure, planning and strategizing abilities. These are the
generic skills that are required in most situations involving human relations. However, there
are a few skills that may be needed to be an above-average negotiator. These skills are a com-
bination of two or more “basic” soft skills.
During negotiation, one has to keep on moving forward, even in the face of incom-
plete information. Most of the time, negotiators have to decide whether to remain
in negotiation or call the bluff. This is a very tough call and is stressful. The nego-
tiator, therefore, must have the ability to feel comfortable with ambiguity and
uncertainty.
During the initial phases, theatrics and posturing are important for positioning one-
self. An above-average negotiator must have the ability to look at the theatrics of
the other party as just that and be able to insulate oneself. To understand that such
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theatrics are not meant as personal attack and, therefore, not get rattled by sud-
den show of hostility. He should be able to make an assertive transition. This would
involve heightened sensitivity to the emotions in play and an acute sense to read
non-verbal behaviour. In the end, he should be able to separate the emotional and
the substantive part of the process.
Ability to motivate oneself under pressure and adverse situations would also go a long
way in ensuring the tenacity and persistence required to go till the end, not throwing in
the towel mid-way. A basic belief in one’s ability to find a solution is important, and this
belief comes only with meticulous preparation, emotional detachment and patience.
Cultural sensitivity: With increasing diversity, changing profile of the working population
and increased interface with people from other nationalities and cultures. A basic knowl-
edge and sensitivity to the do’s and dont’s of other cultures may be necessary to prevent
embarrassment or a breakdown in the process.
SUMMARY
Conflict, though inevitable in human and organizational From a managerial perspective, negotiation is the compe-
life, has acquired a negative connotation. The negative con- tence that is required to resolve conflicts or solve people-
notation is there perhaps because we do not understand the related problems.
nature of conflict, we are oblivious of our attitudes towards it
While conflict may be a situation, negotiation is the art and
and also lack the skills needed to resolve it.
science of resolving those conflicts.
Conflict is about perception. When two persons (or
Negotiation has the following features:
groups) look at an issue from their own perspectives
(because of a large number of reasons, ranging from inad- 1. Two or more parties
equate communication, roles, organizational structure,
2. Something of value or interest to the parties
personality, different emotional state, etc.) and the there is
a difference in the two perspectives, then there is an exis- 3. Desire to engage in interaction
tence of a “potential” conflict situation. Actual conflict may
4. At least some desire to accommodate
not have surfaced at this stage but the conditions for one
arising are there. 5. Authority to honour the agreement/settlement
The moment one person (or group) acknowledges that the From an employee relations perspective, negotiations
difference in perception of the other person (or group) is may be required in different settings and situations—
going to negatively affect the interests of the first person (or formal, informal, structured, unstructured, one-on-one
group), a conflict surfaces. or groups.
Research suggests that “functional conflicts” enhances group The two major strategies in use for negotiation are called
and organizational performance. Many organizations try to distributive bargaining and integrative bargaining.
induce functional conflict within the organization.
Distributive bargaining is based on power and the objective
There are two basic attitudes to resolve a conflict—avoidance is to take as large a share of the total pie as possible. One
and approach. Within these attitudes, there are a number party gains at the cost of the other party.
of styles/strategies for resolving a conflict, namely: resig-
Integrative bargaining, on the other hand is a win-win strat-
nation, avoidance, de-fusion, compromise, engaging and
egy where both parties treat negotiation as a joint problem-
confrontation.
solving to ensure gains for both.
This approach can also be understood in terms of two
Integrative bargaining is gaining ground and is the
concerns that individuals have while resolving a
preferred approach in situations that are complex, or
conflict (The Dual Concern Model). These concerns
where long-term relationship between the parties is
are for the self and for the others, also understood as
important.
assertiveness and cooperativeness. These two concerns
yield five different styles or strategies; namely, avoid- The negotiations process generally follows certain steps
ance, accommodation, compromise, competition and (although it is not always linear). These steps are: prepa-
collaboration. ration, opening, bargaining and closing. Preparation for
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366 Part IV Skills
negotiations is the most important step of the whole process forward in the face of ambiguity and incomplete informa-
and needs maximum time and effort. tion, ability to think clearly in emotionally charged situ-
ations, separate emotional and substantive components,
Negotiation requires almost all the basic “soft skills”.
ability to motivate oneself during adverse conditions and
In addition to these, there are a few skills that may be a cultural sensitivity.
combination of a few basic soft skills, e.g., ability to move
KEY TERMS
approach 352 conflict 351 negotiation 351
avoidance 352 distributive bargaining 359
BATNA 359 integrative bargaining 360
REVIEW QUESTIONS
1 Discuss the various approaches to resolving a conflict. 4 Compare integrative and distributive bargaining with suit-
Which approach, in your view, is more likely to yield a func- able examples. Elaborate characteristics of the two.
tional outcome to a conflict?
5 What are the steps in the negotiation process? Describe the
2 Describe the Dual Concern Model of conflict resolution. steps.
Describe a situation where each of the strategies of the Dual
6 Imagine a situation where you have been involved in a nego-
Concern Model would be the most appropriate one.
tiation. Bring out all the skills that you used in the negotia-
3 Is it desirable to have conflicts within organizations? Why? tions process. Which, in your view, was the most critical
Explain with examples. What is a “functional conflict”? skill? Why?

1 Do you agree that “power” plays the decisive role in the outcomes for both parties. Critically examine this assertion
outcome of conflict resolution? Support your answer with and give your opinion. Support your opinion through argu-
suitable examples. ments and suitable examples.
2 In certain situations, “avoidance” may be a preferred 4 Negotiations must take the natural flow. Any attempt to
approach for resolving a conflict. Do you agree? Explain, “structure” the process may result in resistance from the
with the help of suitable examples. other party. Do you agree with this? What can one do to
ensure that the other party does not object?
3 “Integrative bargaining” cannot work everywhere. It is not
a fact that integrative bargaining will always result in better
D E B AT E
1 Integrative bargaining is just a jargon. After all, ultimately it 2 In the Indian context, confrontation may not be the best
is “power” that will settle the issue. approach to tackle discipline problems at the workplace.
Read the briefs of different roles and then answer the questions at mostly through locally developed vendors. Printer cartridge is
the end. one of the consumables that are procured on a regular basis.
The procurement budget is fixed at the beginning of the FY
I Zenith Systems: Brief of the Procurement Manager
every year based on requisitions received from all the depart-
Zenith Systems is one of the middle-sized IT companies ment and section heads. Based on budget and requirement
located at Bengaluru. It meets its consumables requirements schedule, orders are released at appropriate time, keeping
M17_SING6013_01_C17.indd 366 6/15/10 3:53:06 PM

the lead time in mind. It is 10 September 2007. The company product quality is OK. However, in the last two quarters, there
is in the process of finalizing procurement for the October– have been complaints from a few users that there is smudging of
December quarter. ink from the cartridge on to the paper. You had passed on this
feedback to the Procurement Manager, but once again, there
There is a regular requirement of printer cartridges and the
have been complaints.
orders are placed on a regular basis. Recently, there have been
some changes in the market and the vendors have not been If there is a repeat, the matter may get reported to higher-ups,
very firm about the price. This quarter, the budget for cartridges and you may be pulled up. This time, therefore, you want to be
is INR 1,00, 000 and the requirement for the quarter is 1,000 present, when the order is being finalized with the supplier. You
at a minimum. The company policy is not to carry inventory must ensure that quality parameter is stipulated explicitly in the
of more than 20 per cent, i.e., 200 units against a monthly order. There should be penal provisions in case of repeat com-
requirement of 1,000. It is the 10th day of the last month of plaint from users.
the quarter and the stock is sufficient for only 20 days. The
You don’t care who the supplier is as long as the delivery and
quoted price for the last two orders was Rs 100 per unit for
quality parameters are met. Therefore, your limited agenda
delivery on site.
is to ensure zero-defect and the availability of next-quarter
Your appraisal, to a large extent, depends on your ability to requirement on or before 1 October. You have requested the
maintain budget, and keeping carrying cost and order costs Procurement Manager to call you while finalizing the order. He
to the minimum, i.e., you should adhere to the budget, not has just called.
exceed the prescribed inventory level and not resort to placing
III National Officeware: Brief of the Sales Manager
frequent orders.
National Officeware is a company that manufactures and
The administration manager has received complaints
sells printer cartridges. The company caters mainly to the IT
from the last two lots and wants to be present during the
companies that have mushroomed in Bengaluru recently. In
negotiations.
a fiercely competitive market, the company has been able to
You are to finalize and place an order with the regular vendor establish itself as one of the better suppliers of cartridges in
who is coming to meet you today. He has been a reliable sup- terms of committed deliveries, competitive price and superior
plier and you do not foresee much problem. There are several product quality. The company has long-term relationships with
other vendors for this low-cost, low-technology item. But you many clients, and the order position appears very promising.
have a time deadline, and you are not too sure of their qual- The company has been in the process of expansion to meet the
ity, cost and delivery schedules. growing demand for its products from new customers. It has
held the price for almost a year now. To meet the growth and
The Sales Manager of National Officeware (supplier) is coming
modernization demands, the management has taken a deci-
to see you. He is bringing along people from his operations
sion to be firm on prices in line with the market prices of similar
and the finance team.
products.
II Zenith Systems: Brief of the Administration Manager
You are the Sales Manager for National Officeware. You have
Zenith Systems is one of the middle-sized IT companies been with the company for three years now, and during this
located at Bengaluru. It meets its consumables require- time, the customer base has grown manifold. You have a
ments mostly through locally developed vendors. Printer 100 per cent retention record, i.e., once a customer, always a
cartridge is one of the consumables which are procured customer. Zenith is one of your oldest clients with per quarter
on a regular basis. The procurement budget is fixed at orders of 1,000 plus. Normally, they place order 15–20 days
the beginning of the FY every year based on requisitions before the end of the quarter since the lead time for making
received from all the department and section heads. Based a delivery is only 20 days. The price at which door delivery of
on budget and requirement schedule, orders are released the last order was made was INR 100 per unit. There was a
at appropriate time keeping the lead time in mind. It is tacit understanding that the price was likely to remain firm for
10 September 2007. The company is in the process of the financial year. Zenith is an old and reliable client and you
finalizing procurement for the October–December would like to retain them. The Purchase Manager of Zenith
quarter. has also raised a quality issue and wants you to be able
to address it during the meeting. It is something to do with
You are the Administration Manager at Zenith Systems. Your job
smudging of ink. You are not fully aware of the reasons for this
is to consolidate the requirement for office consumables from
problem, so you have asked one of the operations executives
all the user departments, and send it to procurement section
to accompany you.
for centralized procurement. The job also requires collecting a
systematic feedback on product performance. Printer cartridges You are aware that the company, in keeping with the mar-
are a regular office consumable and the purchase procedure ket trend, intends to follow aggressive pricing policy. You
is streamlined so that there is no disruption in supplies. The have been told that your performance will now be assessed
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368 Part IV Skills
on the basis of net sales realization and not on the basis The company has been in the process of expansion to meet the
of gross sales. It will be an achievement for you to sell at growing demand for its products from new customers. It has
a price so that there is a profit of up to 5 per cent. You held the price for almost a year now. To meet the growth and
intend to discuss the costing structure with the Finance modernization demands, the management has taken a deci-
Executive, and ask him to accompany you to the meeting sion to be firm on prices in line with the market prices of similar
with Zenith so that an immediate closure of the order can products.
be made.
You are the Operations Executive at National Officeware,
The Finance Executive and the Operations Executive are on handling the printer cartridge line. You have been called
their way to meet you. by the Sales Manager of the company to discuss i) a cus-
tomer complaint regarding smudging of the printer cartridge
IV National Officeware: Brief of the Finance Executive
and ii) readiness to ship products, i.e., a feasible delivery
National Officeware is a company that manufactures and schedule.
You are aware of the quality complaint. It is due to occasional
companies that have mushroomed in Bengaluru recently. In
malfunctioning of an imported coil in the heat treatment
assembly. An order has been placed for the replacement of
establish itself as one of the better suppliers of cartridges in
the coil but it would take at least four weeks for the line to
terms of committed deliveries, competitive price and superior
start defect-free operation. No commitment can be made
product quality. The company has long-term relationships with
for 100 per cent defect-free supplies till the middle of next
many clients and the order position appears very promising.
month.
The company has been in the process of expansion to meet
the growing demand for its products from new customers. It To meet the increasing demand, some layout change is going
has held the price for almost a year now. To meet the growth on in the factory and the production schedule may be affected
and modernization demands, the management has taken a in the coming days. The management has also decided now to
decision to be firm on prices in line with the market prices of accept the delivery of orders only in lots of 600. Orders below
similar products. this number may be sold only through wholesalers and retail-
ers. There are 600 units in finished goods inventory (which may
You have been called by the Sales Manager of the company. He
have defectives). WIP inventory is zero. Manufacturing lead
wants to discuss the pricing of the printer cartridge with you and
time is normally 20 days per lot. Due to possible layout change
then accompany him to a meeting at Zenith Computers. The last
at the shop-floor, there can be no firm commitment on delivery
price at which the cartridge was supplied was INR 100 per unit.
for the coming three weeks, since the plant is producing at
The Financial Controller has asked you not to suggest a price
60 per cent of capacity, and orders to be serviced have piled
below total cost + margin (3–5 per cent). You have prepared a
up. By the middle of October, firm commitment can be given
cost sheet:
regarding quality and delivery.
Fixed Cost: INR 40 per unit
The Operations Manager has told you not to commit anything
Variable Cost: INR 60 per unit that the department cannot be sure of. However, orders lost on
account of production will affect your performance evaluation
Margin: INR 3–INR 5 per unit
and the company will lose business. You are leaving to meet
Transportation a nd Packaging Cost (Extra): INR 0.50 per unit the Sales Manager.
Minimum Order Size: Lots of 600 Questions:
Volume Discount: INR 2 per unit, if minimum order is more 1. Prepare a negotiation strategy for each of the role players. In
than 2 lots, i.e., more than 1,200 units a few cases, the role players may have to negotiate internally,
and then with the external customer/supplier.
You are leaving to meet the Sales Manager.
2. What strategy (integrative or distributive) would you follow
V National Officeware: Brief of the Operations Executive
if you were the:
National Officeware is a company that manufactures and
Procurement Manager (Zenith)
companies that have mushroomed in Bengaluru recently. In Administration Manager (Zenith)
Sales Manager (National)
establish itself as one of the better suppliers of cartridges in
terms of committed deliveries, competitive price and superior Finance Executive (National)
product quality. The company has long-term relationships with
Give reasons in support of your approach.
many clients and the order position appears very promising.
M17_SING6013_01_C17.indd 368 6/15/10 3:53:06 PM

NOTES
1 Adapted from Stephen P. Robbins, Timothy A. Judge and Seema 4 James A. Wall, Jr., Negotiation: Theory and Practice
Sanghi, “Conflict and Negotiation”, Organization Behavior, 12th (Glenview, IL: Scot Foresman, 1985).
Edition (Delhi: Pearson Education, 2007), p. 554.
5 Michael R. Carrell and Christina Heavrin, “An Introduction
2 Adapted from Dean Pruitt and Jeffery Z. Rubin, Social to Negotiation” in Negotiating Essentials: Theory, Skills and
Conflict: Escalation, Stalemate and Settlement (New York: Practice (Delhi: Pearson Education, 2008), p. 13.
Random House, 1986); Dean Pruitt and Sung Hee Kim,
Social Conflict: Escalation, Stalemate and Settlement, 3rd
Edition (New York: Mcgraw-Hill, 2004), pp. 40–47.
3 Stephen P. Robbins and Seema Sanghi, “Conflict and

Negotiation” in , Organization Behavior, 11th Edition (Delhi:
Pearson Education, 2006), p. 408.
M17_SING6013_01_C17.indd 369 6/15/10 3:53:07 PM

chapter eighteen
18.1 What are Soft Skills? After going through this, chapter you will be
18.2 Emotional Intelligence and Competence able to:
18.3 A “Framework” • Understand what “soft skills” means
18.4 The Role of an ER Manager/Professional • Understand the meaning of emotional
18.5 Conclusion intelligence and what constitutes emotional
intelligence
• Design a “framework” or an approach for
identifying detailed soft-skill requirements
• Identify the typical “soft skills” that are
essential for the specialized role of
employee relations/HR manager
From Engineer to HR Manager
Ravinder Luthra, a B. Tech. (industrial engineering), on obtaining his degree in 2004, joined an organization manufacturing
optical devices as Graduate Engineer Trainee.
On completion of general orientation and “on-the-job” training, Ravinder was posted as Assistant Manager in the Production
Planning and Control Department of the plant. He was a quick learner and very soon, he was noticed by the top manage-
ment for his excellent analytical inputs. His industrial engineering background landed him a special assignment of carrying
out job analysis and job evaluation for the entire operations area. Ravinder completed the assignment within the assigned
time, and his report was appreciated for its analytical depth. Ravinder was a hard task master, and expected his team mem-
bers to maintain the same standards of performance as his own. Based on his performance, he was offered a posting in the
HR department as Deputy Manager (HRM). It was a tricky decision for him.
After a discussion with the Head of HRM, Ravinder decided to take the offer. With his technical background, good grasping
power and analytical mind, he should not face any problem. Moreover, HR was a generalist profile and it should not take
him much time learning the ropes.
About eight months after joining the HR department, the HR Manager called Ravinder to ask how things were going.
Ravinder replied that everything was under control and that he had been able to streamline the HRIS in record time. There
was no unrest on the shop floor and that he had been able to support the Line Manager in maintaining tight discipline. The
HR Manager asked Ravinder to sit down and then told him that there appeared to be some gap. There were serious com-
plaints against him from the shop-floor workmen, alleging that Ravinder did not have time to listen to their grievances—
that he was forever busy with his PC and no one was supposed to meet him during this time; that he had very little patience
to listen to problems of workmen and asked them to mail their grievances to him. The Shift In-charge has alleged that
Ravinder was good at analytical work but of no use to him in people management.
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Soft Skills for Employee
Relations
India has a large pool of qualified persons, but there is a serious shortage of employable persons. The shortage
is largely on account of deficient soft skills. In the area of employee relations, these skills assume greater sig-
nificance since the role mainly envisages interface with a cross-section of employees which, in turn, requires
people skills.
Employee relations, like any other function dealing with the management of people, besides
requiring “technical skills”, also requires certain “other” skills. In some measure, these “other”
skills are common to all functions. However, because the employee relations manager is to con-
cern himself mainly with people-related issues, the relative importance of these skills become
even more. For want of any universally accepted set of skills, all such skills are clubbed under an
umbrella term called “soft skills”, essentially distinct from the technical or “hard skills” required
for a job. This chapter tries to define “soft skills” and develop a “framework” for the identifica-
tion of these skills.
18.1 What are Soft Skills?

It is hard to find a universally accepted and rigorous definition of “soft skills”. As a “construct”, “soft skills”
is not well-defined. Although we “understand” it, this understanding is expressed in loose terms. The
following definition is a creditable attempt to define “soft skills” with precision. Even though it appears
complex, at least the boundaries of the term have been traced and supplemented with examples.
“Soft skills tend to be skills by which the individual interacts with, interprets, structures, coordi-
nates or otherwise informs the social and physical environments within which physical, societal and
or personal product may be generated”1.
Soft skills are deployed for efficient use of hard or technical skills as well as for the achievement
of personal and interpersonal goals. These skills are difficult to define, observe, quantify or measure.
These skills largely relate to how people understand themselves and how they relate to others. Unlike
technical skills which are acquired through formal education, soft skills are largely learnt from life
experiences. These are difficult to change later unless one becomes aware of deficit in specific areas
and works towards reducing the deficit.
Examples of soft skills would include listening, influencing, communicating, negotiating, coun-
selling, empathizing, asserting, teaming, resolving conflicts, solving problems, managing emotions
(in self and others), etc.
In a practising manager’s term, “soft skills” are those skills that are needed on the job, in addition
to the technical skills required. These “skills” are said to be the differentiator between effective and
not-so-effective managers.
Managers whose roles require excessive interaction with people may need one set of “soft skills”
whereas those in roles that require interface, largely in the technological domain, may require another
set of soft skills. A few soft skills may be common across roles, for example, the ability to motivate
oneself.
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372 Part IV Skills
Soft Skills 18.2 Emotional Intelligence

Soft skills tend to be skills
by which the individual
and Competence
interacts with, interprets, Daniel Goleman, in his book, Working with Emotional Intelligence,2 cites the findings of a
D
structures, coordinates
national
n survey of American employers, which indicated that employers are now looking for
or otherwise informs
the social and physical entry-level
e workers, with specific technical skills less important than the underlying ability to
environments within which learn
l on the job. The employers listed the following skills as desirable in employees:
physical, societal and/or
personal product may be 1. Listening and oral communication
generated.
2. Adaptability and creative responses to setbacks and obstacles
3. Personal management, confidence, motivation to work toward goals, a sense of
wanting to develop one’s career and take pride in accomplishments
4. Group and interpersonal effectiveness, cooperativeness and teamwork, skills at
Skills that employers look negotiating disagreements
for in new hires:
Listening and oral com- 5. Effectiveness in the organization, wanting to make a contribution, leadership
munication potential
Adaptability and
creative responses to
Of
O the five desired traits, just one was academic: competence in reading, writing, and math.
setbacks and obstacles The model introduced by Daniel Goleman focuses on emotional intelligence as a wide
Personal management, array
a of competencies and skills that drive leadership performance. Goleman’s model out-
confidence, motivation lines
l five main pillars of emotional intelligence:
to work toward goals, Self-Awareness: The ability to read one’s emotions—recognizing a feeling as it happens. The
a sense of wanting to ability
a to monitor feelings from moment to moment is crucial to psychological insight and self-
develop one’s career
and take pride in
understanding.
u People with greater certainty about their feelings are better pilots of their lives.
accomplishments
Group and interper-
sonal effectiveness, BOX 18.1 FOR CLASS DISCUSSION
cooperativeness and
teamwork, skills at Suditi Bhadauria, the Training and Development Manager for Genesis Technological
negotiating disagree- Services Limited (a 4,000 strong BPO), was looking at a mail from the VP (Operations),
ments wherein he had asked her to probe and find out specific areas where there may be need
Effectiveness in the for building competence of the team leaders. His concern was an increasing discontent
organization, wanting
to make a contribu- amongst the team members and a very high rate of attrition. The exit interviews had
tion, leadership poten- indicated that the leaving employees were satisfied with the systems and policies of the
tial company and that the working conditions were better than what prevailed in the industry.
Genesis’ compensation was above the industry average. Most of the employees, however,
pointed out disappointment with the environment within teams. Lack of perceived equity
in job allocation, shift rotation, recognition criteria, performance evaluation, incentives,
etc. were mentioned as the main reasons for the decision to quit. What the VP was tell-
ing Suditi was that the “systemic” factors could be ruled out. The “problem” most likely
was with people handling skills at the TL level. Suditi was to probe and pin-point the
specific areas where training and development interventions could help build the required
competencies.
Suditi proceeded with the job systematically. She studied the job analysis of the TLs,
talked to the team members, process leads (to whom TLs reported) through semi-struc-
tured interviews. She could identify various deficient competencies, which she proceeded
to map into a “framework” that placed these skills from the “basics” to “advanced” or
from “simple” to “complex”. The next logical step for her was to design suitable “interven-
tions” for the people whose primary task was to manage “people”.
Will Suditi succeed? Did she follow the correct approach? Don’t you think a short
duration “General Management” module would have helped? Isn’t “people manage-
ment” an inborn trait? Aren’t some people naturally competent in managing people? Can
people be “trained” in these difficult-to-identify-and-define competencies?
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Soft Skills for Employee Relations 373
Managing Emotions: Handling feelings so that they are appropriate is an ability that builds on
Five pillars of emotional
self-awareness. Mere self-awareness is not enough; the ability to handle it and use it to advantage intelligence:
is another distinct ability. The awareness of anger and what to do with that anger are both neces-
sary, although, often, an awareness of the emotion itself provides a handle on the emotion. Self-awareness
Motivating Oneself: Marshalling emotions in the service of a goal is essential for paying Managing emotions
attention, for self-motivation, for mastery and for creativity. Emotional self-control—delay- Motivating oneself
ing gratification and stifling impulsiveness—underlies accomplishment of every sort. Empathy
Recognizing Emotions in Others (Empathy): The ability that builds on emotional self- Handling relationship
awareness is the fundamental “people skill”.
Handling Relationships: The art of relationships, for the mot part, involves the skill in man-
aging emotions in others.3
Goleman includes a set of emotional competencies within each construct of EI.
Emotional competencies are not innate talents, but rather learned capabilities that must be
worked on and developed to achieve outstanding performance. He posits that individuals
are born with a general emotional intelligence that determines their potential for learning
emotional competencies4.
Although criticized by a few as mere pop-psychology, Goleman’s framework is an excel-
lent guide for aspiring managers and managers to look at comprehensive range of “soft skills”.
This is because these emotional competencies are the building blocks of what we call “soft
skills”. And, once again, the good news is that these competencies can be learned. Goleman
has made broad brush strokes, covering all walks of life (including that of an ER manager), but
we need to get a closer look at the specific requirements from the role of an ER manager.
18.3 A “Framework”
There are scores of “soft skills” loosely defined. If we try to randomly list down the soft-skill
requirements for a position, we may get hopelessly lost and may end up with a list with which
we can do little. A rational approach could be to look at the requirements of each role and
then break it down into technical and other skill requirements. Many of the “soft skills” are a
combination of one or more “basic” skills. We are using “skill” here in this text to cover all the
KSA (knowledge, skills, abilities) requirement of a role. The detailed mapping would lie in
the realm of job analysis or training-needs identification. Our approach here is to just suggest
an approach and to identify the soft skills required for an HR/ER role.
Broadly, we can say that communication may be a crucial skill for an HR role (as also
for many other roles). Now communication is such a broad area that unless we break it down
further, it may not be of any practical use. Table 18.1 illustrates how we can deconstruct
The constituent component of soft skills. Table 18.1

Basic Intermediate Advanced
Communicating Attention Listening Counselling

Comprehending Validating Reading emotions in self
Paraphrasing Communicating Verbally Reading emotions in others
Verbalizing Deciphering Non Verbal Persuasive presentation
Planning What to Speak Communication conducting team meetings
Components of Non Using Non-Verbal Designing structured
Verbal Communication Communication Receiving communication–with team
Principles of Verbal Feedback and others
Communication Giving Feedback Negotiating–one on one
Giving names to different Planning a whole as well as in teams
feelings/emotion Communication Handling emotions and
stress in communication
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374 Part IV Skills
communication into its constituents, especially from the point of view of an HR/ER role. As
is evident, proficiency at the basic level is essential to learn the skills of the next two levels.
For each of the soft skills, therefore, we can identify the constituent building blocks and then
identify customized intervention to build up the deficient component, with the objective of
building competence in communication for the HR role. For an HR role, written communi-
cation may not be as crucial as verbal and non-verbal communication. It is beyond the scope
of this text book to cover all the skills up to the basic level. What we will, therefore, do is to
suggest an approach (to identify skills by breaking down a larger grouping into actionable
skills) and then list the major soft-skills requirement for this role. Breaking these skills down
into the constituent components as suggested in Table 18.1 is an analytical method which
would help break down skills other than communication into actionable parts.
18.4 The Role of an ER Manager/Professional

Soft-skills (or any other skills) requirement will flow from the role requirements. While the
role of an ER manager may vary from organization to organization, there would be certain
aspects that would be common to all. We will look at the role in a unionized organization and
a non-unionized organization.
Communication
Structured Communication
Planning a meeting
Ability to hold productive meetings
Ability to prioritize agenda
Sensitivity in choosing points for discussion
Articulation of points in a “sensitive” manner
Ability to steer discussion on controversial topics
Manage to handle emotional outbursts of others
Using one’s own emotional expressions to advantage
Persuasive Presentations
Unstructured Communication
One-to-One Communication
Ability to listen as per situational requirements (empathetic, task-oriented, evaluative)
Ability to paraphrase and summarize
Steering a conversation in the desired direction
Two-Way Communication
Ability to fulfil emotional and substantive concerns of the group
Summarize the outcome
Facilitate consensus (if required)
Handle undue pressure
Handling “difficult” members
Relationships
Ability to give and receive feedback
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Fostering “trust” in relationships

Ability to define and maintain boundaries
Line Managers
Ability to give “factual” assessment of state of the affairs
Maintain professional integrity
Withstand pressure
Creating an alliance and commonality of objectives
Ability to establish professional credibility
Staff
Sensing communication requirements (in terms of frequency, content and feelings)
Union Office Bearers
Ability to maintain neutrality in multi-union situation
Conveying professional competence
Ability to withstand undue pressure
Determination of the level of transparency with dealings
Ability to assess inter- and intra-union dynamics and power play
Ability to assess essential and tradable demands
Intelligence gathering
Building coalitions within unions
Negotiations
Discipline
Ability to convey (through words and through Acts) the non-negotiability of discipline
Ability to convey explicitly the transparency and equity in the administration of
discipline
Systems Information
Ability to assess information requirement of all stakeholders
Ability to decide the “need to know” and the “nice to know” requirements
Ability to assess vital and sensitive information and the establishment of information
integrity
PMS
Skill of persuasion, ensuring a “buy in” to the system
Coaching, counselling skills
Giving and receiving feedback
Training managers and staff in the process
Ability to prevent distortions in process and outcomes
Image of the Self
An HR or ER manager is always watched by the employees and fellow managers. It is
absolutely critical for this manager to be able to see how others perceive him. Caesar’s
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376 Part IV Skills
wife, after all, must be above all suspicion! The HR/ER manager, must never, ever,
indulge in acts that are less than 100 per cent honest, short-circuit systems, take advan-
tage of systems or processes or help themselves to something extra. This goes a long way
in establishing credibility and, in our opinion; this skill/sensitivity goes on to enhance
the image of the HR/ER manager more than any other skill. This is non-negotiable.
18.5 Conclusion
We can go on adding to this list since this is not an exhaustive one. In fact, there can never
be one that covers all the roles and all situations. However, we have tried to draw on our long
years of experience in industry to map the essential skills that may be required. We have
tried to draw the requirements from what the HR or ER manager actually does rather than
approach it from the generic skills, for example, inter-personal skills and communication
skills. In our opinion, the above approach is based on common sense and can be applied to
specific situations to yield a very accurate list of requirements. From the discussion presented
in this chapter, it may appear as though the terms “skills” and “tasks” have been mixed. While
this may be true in the present context, a painstaking exercise to distinguish and deconstruct
these terms would yield the same end result.
SUMMARY
“Soft skills” is not a very precise construct and has been competencies. These “pillars” are: self-awareness, the ability
defined variously depending on the point of view adopted to to manage emotions, empathy, self-motivation and the abil-
explain the term. ity to handle relationships.
In a practising manager’s term, soft skills are those skills The emotional competencies that constitute emotional intel-
that are needed on the job, in addition to the technical skills ligence are called soft skills. Surveys of employers have found
required. These skills are said to be the differentiator between that soft skills are the most important competencies that they
successful and not-so-successful managers. Examples of soft desire in employees.
skills could include planning, preparing, organizing, com-
A systematic way of identifying the soft-skills requirement
municating, observing, describing, identifying, empathizing,
for the role of an ER or HR manager could be made if we
learning, intuition, sense of timing, attitude, tool develop-
moved backwards from the role requirements to the differ-
ment, skill transfer, process development, creativity, ingenu-
ent levels of soft skills. Using this framework, the soft-skills
ity, design, sense of aesthetics, endurance, etc.
requirements (up to the first level) of an HR/ER manager has
Daniel Goleman has defined five pillars of emotional been identified.
intelligence, which, in turn, are made up of emotional
KEY TERMS
emotional intelligence 372 self-awareness 372 structured communication 374
empathy 373 soft skills 371 unstructured communication 374
REVIEW QUESTIONS
1 What is your understanding of soft skills? List down your 3 Describe an approach to map the exact soft-skills require-
own soft-skills requirements (even though you may be a ments of a particular role. Use an example to explain the
student). approach.
2 What is emotional intelligence? What is emotional com- 4 List down the role requirement of an HR executive (in a
petence? What are the pillars of emotional intelligence as non-union environment). Break down the requirements to
described by Daniel Goleman? identify the advanced-level soft skills required for the role.
M18_SING6013_01_C18.indd 376 6/15/10 3:56:10 PM


1 People are born with their soft skills. What, then, would be 2 Soft-skills requirements are common across all jobs. All jobs
the use of training people in these skills? Give your argu- need communication, motivation, etc. Do you agree with
ments in support, with appropriate examples. this view? Why or why not?
D E B AT E
1 Soft skills do not really matter as much as it is made out to. 2 “Employee relations” is more about instincts than about
Unless a person fulfils the functional or technical require- skills or knowledge. The more experience you have in deal-
ments of a job, he/she will not be hired. A scientist, after ing with people, the better your instincts.
all, does not need soft skills to make progress in their
research.
Problematic Pay-slip Questions
Anil Sharma is the manager of the ammonium sulphate plant 1. As Anil, what will be your immediate action and why?
in a fertilizer company. The shop employs about 500 people.
2. What skills will Anil need to get to the root of the problem
The manager of the shop reports to Deputy General Manager
quickly?
(Operations). The manager of the shop is the disciplinary
authority for all the workmen under his control. 3. How will Anil ensure that not only is justice done but also
“seen to be done”? Do you think it is important? Why?
One day, while going through the production reports in the
morning, Anil heard loud noises outside his office. He tried to 4. Why does Bhrigav have a negative opinion of Chandan?
ignore it for a while but the noise only became louder. When What could have led to such an opinion? Do you think
he stepped out of his room to locate the source of the com- Chandan himself was responsible for his image? What could
motion, he saw that all the workmen had stopped work to he have done to prevent this?
gather around Bhrigav, a fitter, who was shouting at the top
HR Challenges at Infosys
of his voice. Chandan, the HR officer, and Dileep, the Section
Officer, were standing closest to Bhrigav, trying to restrain him The globalization is truly globalizing the employment
at which his voice got even louder. It appeared that Bhrigav practices in India, like many other functions. The downturn
was agitated about some acts of people in the time office on in global economy in 2008 affected the Indian industry in
account of which he had faced problems with his pay-slip for no time. One of the greatest challenges during these times
three months in a row. is for the HR or ER professional, when he has to navigate
his way through the opposing needs of the business and the
Anil called Bhrigav and Chandan inside his room and asked
employee. Here is an excerpt from an interview given by
for an explanation of the scene that he had witnessed.
Nandita Gurjar, Head of HR at Infosys Technologies5:
Chandan said that despite sending Bhrigav’s leave regu-
larization to the time office through regular monthly atten- How do priorities for an employee-friendly organization change
dance statements, Bhrigav was marked absent as reflected during a downturn when compared to an upturn?
in Bhrigav’s pay-slip for the month. At this point, Bhrigav
Whether in good times or downturns, it’s never “cool” for HR.
intervened to shout loudly that the people in the time office
There is always enough work, though there are some shifting
belonged to the rival union and not updating his leave regu-
priorities. As an organization, employees are our utmost concern
larization was just another way of deliberately harassing him.
and at Infosys, during a downturn or an upturn, the larger realities
At this point, Bhrigav suddenly grabbed hold of Chandan’s
remain the same; i.e., keeping the employee engaged. The focus
collar and threatened him, saying, “I think you are also
is now shifting from recruitment to allocation of benched employ-
involved in this game. Your actions always tend to favour the
ees and ensuring that they are not on the bench for too long.
other union. If this thing is not sorted out within two days,
there will be hell to pay!” With this Bhrigav stormed out of the What are the new HR strategies aimed at coming to terms with
room in a huff. the situation?
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378 Part IV Skills
Instead of reacting in a knee-jerk fashion to what business 1. What should be the soft-skill requirement for an ER
wants, we are of the opinion that the principle of HR can- manager during such downturns?
not change. We are not a hiring and firing organization. The
2. Can you use the “framework” to map out a few of the soft
management has come up with the philosophy of keeping the
skills required during such times?
flock together for the next two years. We should also ensure
that people who stay back don’t feel like trapped employees.
NOTES
1 Glenn P. Costin, Legitimate Subjective Observation [LSO]: 4 Yvonne Stys and Shelley L. Brown, “A Review of the
The Evaluation of Soft Skills in the Workplace: A Concurrent Emotional Intelligence Literature and Implications for
Session Briefing Paper The National Training Framework - Corrections”, Research Branch Correctional Service of
Training Partnerships and Regional Development, Albury Canada, March 2004, p. 15 (http://www.csc-scc.gc.ca/text/
Convention Centre and Performing Arts Centre, May 2002, rsrch/reports/r150/r150_e.pdf ).
http://www.dsf.org.au//papers/93/SoftSkills
5 Excerpted from an interview with Nandita Gurjar,
2 Daniel Goleman, Working with Emotional Intelligence “Managing Employee Psyche Tough in a Slowdown”, The
(<place of publication?>: Bantam Books, <date of Hindu Businessline, 23 March 2009.
publication?>).
3 Adapted from Daniel Goleman, Emotional Intelligence:

Why It Can Matter More Than IQ (London: Bloomsbury
Publishing Plc, 1996), p. 43.
SUGGESTED READING
1 Goleman, Daniel, Emotional Intelligence: Why It Can Matter 2 Stys, Yvonne and Shelley L. Brown, “Literature and
More Than IQ (London: Bloomsbury Publishing Plc, 1996). Implications for Corrections”, Research Branch Correctional
Service of Canada, March 2004.
M18_SING6013_01_C18.indd 378 6/15/10 3:56:10 PM

glossary
A for example, depreciation as permissible under
the Income Tax Act, development rebate or
allowance that the employer is entitled to deduct
AFL-CIO: The American Federation of Labour
from his income under the Income Tax Act, any
and the Congress of Industrial Organizations,
direct tax liability within the provisions of Section
commonly the AFL-CIO, is a national trade
7 or any other amount specified in Schedule 3.
union centre. It is the largest federation of unions
in the United States. It was formed in 1955 with Avoidance: The “avoidance” approach is based
the merger of two large federations named the on fear and conflict is sought to be resolved more
AFL and the CIO. often than not by avoiding the conflict situation.
Agency Shop: A shop that requires non-
union workers to pay a fee to the union for its
services in negotiating their contract.
B
Bharatiya Mazdoor Sangh: The Bharatiya
AITUC: The All India Trade Union Congress is Mazdoor Sangh is a CTU organization. Although
the oldest trade union federation in India. At the it claims to be an apolitical organization, there
time of its founding in 1920, it was affiliated to the appears to be a strong influence of the RSS/BJP
Indian National Congress. Later (1947), the Indian ideology.
National Congress formed its own trade union fed-
eration. AITUC is now affiliated to the Communist Board of Conciliation: A tripartite ad hoc
Party of India. It is a central trade union. body appointed by the appropriate government
for promoting the settlement of disputes where
Allocable Surplus (Payment of Bonus the conciliation officer fails to do so within 14
Act, 1965): Allocable surplus is an amount days. The Conciliation Board consists of a chair-
equivalent to 60 per cent or 67 per cent of the man and two to four other members nominated
available surplus. It is 67 per cent in case of non- by the parties to the dispute.
banking companies which do not have provisions
for payment of dividends out of their profit in Bonus: In common parlance, bonus is
India. For all other companies, it is 60 per cent. regarded as an ex gratia payment made by the
employer to his workers to provide encourage-
Approach: The “approach” attitude to resolv- ment for the extra effort by them in the produc-
ing conflicts means we would like to resolve tion process. Sometimes, it also represents a
the conflict (or problem) by approaching the desire of the management to share its gains with
problem and solving it. the workers, who are vital to the production
process and who contribute to the income and
Appropriate Government: Many acts refer
profits of the enterprise.
to the term appropriate government. The term
denotes the jurisdiction of a particular govern- Business Theory of Unions: This was
ment in relation to the various provisions of the proposed by Samuel Gompers. According to this,
Act. For example, the “appropriate government” the primary objective of the union is to protect
for dealing with Industrial Disputes under the the economic interest of the workers.
ID Act would be the central government in case
of a mine.
Automation: It is the use of control systems
C
or computers used to control industrial machin- Central Trade-union Organizations: A
ery or processes replacing human operators. central trade-union (CTU) organization may
Automation greatly reduces the need for human be defined as a federation of trade unions. Its
sensory and mental requirements. strength is the combined membership of all
registered unions is taken into account and to
Available Surplus (Payment of Bonus qualify as a CTU, the activities must be spread
Act, 1965): From the gross profit calculated over at least 4 states and in 4 industries and have
through Section 4, certain specified sums are a combined membership of 500,000. Verification
to be deducted as prior charges. These prior of membership is done by the central govern-
charges are mentioned in Section 6 of the Act; ment, once in 4 years.
Z01_SING6013_01_Glossary.indd 379 6/14/10 3:26:10 PM

380 Glossary
Chaebol: A South Korean term for a conglomerate of many Contract Labour: A workman is deemed to be employed as
companies clustered around one parent company. The companies “contract labour” in or in relation to the work of the establish-
usually hold shares in each other and are often run by one family. ment, if they are hired for such work by or through a contractor,
They also have strong ties with the government in power. with or without the knowledge of the principal employer.
Check-off: This refers to the situation when the employer Contribution: The sum of money payable to the Corporation
deducts union dues from pay and hands over the same to the union. by the principal employer in respect of an employee and includes
any amount payable by or on behalf of the employee in accor-
CITU: The Centre for Indian Trade Unions is a CTU with
dance with the provisions of the ESI Act.
political links with the Communist Party of India (Marxist).
Contributions Period and Benefit Period: Workers, covered
Closed Shop: An organization that employs only those people
under the ESI Act, are required to contribute towards the ESI
who are already union members directly from the union.
scheme on a monthly basis. Contribution period means a six-
Closure (ID Act, 1947): The permanent closing down of an month time span from 1 April to 30 September and 1 October
industrial establishment. to 31 March. Thus, in a financial year, there are two contribution
periods of six months’ duration. Cash benefits under the scheme
Collective Bargaining: A process where the collective of
are generally linked to the contribution paid. The benefit period
employees, through their representatives, bargain with the
starts three months after the closure of a contribution period.
employer for having their demands met.
Craft Union: A trade union that comprises workers who
Committee Procedure (for fixing and revising minimum
are engaged in a particular craft or skill but who are not all work-
wages according to the Minimum Wages Act): The appro-
ing for the same employer, e.g. Welder’s Union, Cabin
priate government may appoint a committee comprising represen-
Crew Association.
tatives of employers and employees and independent members
(not exceeding 1/3 of the committee’s strength). The recommen-
dations of the committee are published in the official gazette and
come into effect after expiry of three months.
D
Deductions from Wages (Payment of Wages Act,
Compulsory Arbitration: When the concerned parties are
1936): The Act prohibits all kinds of deductions except those
required to accept arbitration without any willingness on their
that are authorized by or under the Act (Section 7). Authorized
part. Within the context of the ID Act, 1947, compulsory arbitra-
deductions include fine, deduction for amenities and services
tion amounts to adjudication.
supplied by the employer, advances paid, over-payment of
Conciliation Officers: Appointed permanently or for a limited wages, loan, granted for house-building or other purposes,
period, for a specific area or for a specific industry, to whom the income tax payable, in pursuance of the order of the court, prov-
industrial disputes are referred to by the appropriate government. ident fund contributions, cooperative societies, premium for life
insurance, contribution to any fund constituted by employer or
Confinement: Labour resulting in the issue of a living child, or a trade union, recovery of losses, ESI contribution, etc.
labour after 26 weeks of pregnancy resulting in the issue of a child
whether alive or dead. Direct Action: Pressure tactics used by unions, e.g. strikes and
agitations, in order to have their demands met.
Conflict Approach: An approach that assumes conflict to be
inherent in organizations and, managing an organization assumes Disablement: Under the Workmen’s Compensation Act,
managing such conflicts. Pluralism and social action are two disablement determines the extent of compensation that can be
important sub-categories within the conflict approach. claimed by the worker injured in the course of his employment.
Under the Act, there are four types of eventualities that can be
Conflict: When two persons (or groups) look at an issue from compensated—death, permanent total disablement, permanent
their own perspectives (because of a large number of reasons, partial disablement and temporary disablement.
ranging from inadequate communication, roles, organizational
Disintermediation: In the current context, it means the
structure, personality, different emotional states, etc.) and the
removal of an employee’s role between the customer and the
there is a difference in the two perspectives, then there is an exis-
product or service. ATMs, for example, enable the customer to
tence of a “potential” conflict situation. Actual conflict may not
avail of the service without going through a bank teller.
have surfaced at this stage, but the conditions for one arising are
there. The moment one person (or group) acknowledges that the Disputes of Interest: These relate to claims by employees or
difference in perception of the other person (or group) is going proposals by a management about the terms and conditions of
to negatively affect the interests of the first person (or group), a employment. These are mostly disputes that can be resolved through
conflict surfaces. discussions and negotiations, give and take. However, in the event of
a dispute not getting resolved through negotiation, these too may be
Continuous Service: For the purpose of eligibility for pay-
left for resolution through arbitration/adjudication.
ment of gratuity under the Payment of Gratuity Act, an employee
is said be in continuous service if they, for a period of time, have Disputes of Rights: These relate to the application or inter-
been in uninterrupted service, including service that may be pretation of an existing agreement or contract of employment.
interrupted on account of sickness, accident, leave, absence from This kind of dispute, if unresolved through negotiations, is very
duty without leave, etc. amenable to resolution through arbitration or adjudication.

Glossary 381
Disputes Relating to Discipline: These arise from acts of rate declared every year by the central government in consulta-
interference either with the exercise of right to organize or with tion with the Board of Trustees. The fund with accruing interest
acts termed as “unfair labour practices”. becomes payable at the time of superannuation or death.
Distributive Bargaining: A kind of bargaining where the gain Employees’ State Insurance Act, 1948: The Employees’
of one party is at the cost of the other party. The “share in the pie” State Insurance Act, 1948, is a piece of social-welfare legislation
is to be distributed between the bargaining parties. enacted primarily with the object of providing certain benefits to
employees in case of sickness, maternity and employment injury
E and also to make provision for certain others matters.
Employers’ Organizations: Voluntary bureaucratic institu-
Emotional Intelligence: Consists of abilities such as being
tions that place reliance on specialization (industry or sector) to
able to motivate one and persist in the face of frustrations; to con-
fulfil organization objectives.
trol impulses and delay gratification; to regulate one’s moods and
keep distress from swamping the ability to think; to empathize Employment Injury: A personal injury to an employee caused
and to hope. by accident or an occupational disease arising out of and in the
course of his/her employment, being an insurable employment,
Employee Empowerment: A strategy and philosophy that
whether the accident occurs or the occupational disease is con-
enables employees to make decisions about their jobs. Employee
tracted within or outside the territorial limits of India.
empowerment helps employees own their work and take respon-
sibility for their results. Equity Concept: Based on an ethical stance that all employees
should be treated equally, and that the same fundamental terms
Employee Engagement: A combination of commitment to and conditions of employment are to apply to all.
the organization and its values plus a willingness to help out col-
leagues (organizational citizenship). It goes beyond job satisfac- ESI Corporation: The social-security programme under the
tion and is not simply motivation. Engagement is something the ESI Act is administered by a corporate body called the Employees’
employee has to offer: it cannot be “required” as part of the State Insurance Corporation. It comprises members representing
employment contract. interest groups that include employee, employers, the central and
state government, besides representatives of parliament and the
Employee Involvement: Creating an environment in which medical profession.
people have an impact on decisions and actions that affect their
jobs. Employee involvement is not the goal nor is it a tool, as
practised in many organizations. Rather, employee involvement is a F
management and leadership philosophy about how people are most
Factory: As defined in the Factories Act, 1948, a “factory”
enabled to contribute to continuous improvement and the ongoing
means any premises (i) wherein 10 or more workers are work-
success of their work organization.
ing, or were working on any day of the preceding 12 months,
Employee Participation: Employee participation is part of a and in any part of which manufacturing process is being carried
process of empowerment in the workplace whereby employees are on with the aid of power or (ii) wherein 20 or more workers are
involved in decision-making processes, rather than simply acting working, or were working on any day of the preceding twelve
on orders. months, and in any part of which manufacturing process is
being carried out without the aid of power but does not include
Employee Relations: This lays emphasis on the individual a mine subject to the operation of The Mines Act, 1952, or
employee rather than the workforce as a whole. Its purpose today is mobile unit of armed forces, a railway running shed or a hotel,
to build partnerships between the employer and the employee. restaurant or eating place.
Employees Deposit Linked Insurance (EDLI) Scheme: Fair Wage: A level of wage somewhere between minimum and
EDLI provides life-insurance benefits to employees who are living wages.
members of the Provident Fund Scheme.
Flexibility Concept: According to the concept of the “flexible
Employees’ Pension Scheme and Fund: Provides for workforce”, where everyone concerned is trained to be available for
members to avail of pension on superannuation or retirement and any work that the organization may require of them.
on disablement.
Employees’ Provident Fund and Miscellaneous Provisions
Act, 1952: The Employees’ Provident Funds and Miscel-
G
laneous Provisions Act, 1952 was enacted to provide a kind of Globalization: It refers to economic integration of national econ-
social security to industrial workers. It purports to be a social omies into the international economy through trade, foreign direct
measure, inducing employees to save a portion from their present investment, capital flows, migration, and the spread of technology.
earning for future. Gratuity: A lump sum payment made by the employer as a
mark of recognition of the service rendered by the employee
Employees’ Provident Fund Scheme: A scheme under the
when he retires or leaves service.
provisions of the EPF & MP Act, 1952. Under this scheme, an
account of each contributing member is maintained by the provi- Grievance Disputes: Arising from day-to-day workers’ griev-
dent fund organization. Interest is calculated on the basis of the ance or complaints.

382 Glossary
H Industrial Tribunals: The tribunals appointed by the appro-

priate government for adjudication in matters listed in Schedule
Hazardous Process: Defined in Section 2(cb) of the Factories 3 prescribed under the ID Act, which affect the working of a
Act, 1948, it implies such processes that may be carried out in an company or an industry.
industry specified in Schedule 1 of the Act and the process may Industry Union: In this form of organization, workers in the
cause one of the following two (or both): same industry are organized into the same union, irrespective of
i. Cause material impairment to the health of the persons their skills.
engaged in or connected with it
Insurable Employment: An employment in a factory or
ii. Result in pollution of the general environment
establishment to which the ESI Act applies.
HMS: The Hind Mazdoor Sabha is a CTU organization with no
apparent political affiliation. It was initially formed with socialist Insured Person: A person who is or was an employee in respect
leanings. of whom contributions are or were payable under this Act and who
is, by reason thereof, entitled to any benefit under the ESIC Scheme.
Human Capital: Human resource deployed in productive work.
Integrative Bargaining: It is a kind of joint problem solving
where both parties try to arrive at a solution that is mutually
I satisfying. The effort is to find novel solution, maybe increase the
size of the pie itself.
ILO Conventions: An instrument through which the ILO sets
the International Labour Standards. These are matters pertaining International Labour Conference: The policy-making and
to conditions of conditions of labour and employment and are legislative body of the ILO. It is here that the conventions and
adopted in the International Labour Conference. Once adopted recommendations are finally adopted. In the ILC, each member
and ratified by the member countries, conventions take the form state is represented by the government’s, the employers’ and the
of international treaty and becomes enforceable. employees’ delegates in the ratio of 2:1:1.
ILO Recommendations: Also adopted by the International International Labour Office: The permanent secretariat of
Labour Conference, recommendations too are instruments for the International Labour Organization. It is headed by a Direc-
setting International Labour Standards. However, as the name sug- tor General, who also functions as the Secretary General of the
gests, these are only recommendatory in nature. International Labour Conference.
Industrial Action: Industrial action is a term that has not International Labour Organization: An international tri-
been defined in any of the industrial laws but it means action partite body founded in 1919 in the aftermath of World War I (as
that may follow if disputes of conflicts cannot be resolved a part of Treaty of Versailles, to end WW I). The main aim of ILO
through negotiations. “Strikes” and “lockouts” are forms of was to promote the conditions of labour throughout the world.
industrial action. INTUC: Indian Trade Union Congress is the trade-union wing
Industrial Democracy: This approach compares democ- of the Indian National Congress. It is a CTU.
racy in the government (wherein the “state” is prevented from
inflicting injury to individual citizens by means of elected
representatives and people’s power) to an industrial setting J
where, through unions, the workers protect themselves from Job Evaluation: A scientific method to determine the “relative”
the power and influence of the owners, as the individual work- worth of a job in comparison to other jobs within an organization.
ers are no match for the owners in these aspects. Job evaluation helps establish internal equity within the organiza-
tion, also enabling inter-organization comparisons.
Industrial Dispute: Has been defined under the Indus-
trial Disputes Act, 1947. Stated simply, it is a dispute between
the employer and (a group of) employees on matters relat-
ing to employment or conditions of employment. The ID Act
L
also includes disputes between employees and employees, or Labour Administration: Involves the formulation of labour
employers and employers, which are also considered industrial policy and the enforcement of labour laws for the promotion of
disputes. labour welfare.
Industrial Disputes Act, 1947: One of the most important Labour Courts: Constituted by the appropriate government
pieces of legislations, it concerns itself, in the main, in provid- for adjudication on industrial disputes relating to any matter
ing for prevention and settlement of industrial disputes between specified in Schedule 2 of the ID Act.
employers and employees, employees and employees and employ-
ers and employers. Labour Legislation: Under the Constitution, the legislative
powers in different fields of government activity are shared by
Industrial Relations: Looks at the relationship between the the central and state governments, in accordance with the lists
management and the workers, particularly groups of workers that form a part of the Constitution—the Union list, the Concur-
represented by a union. Its purpose is to maintain industrial rent List and the State List. The parliament has exclusive pow-
peace. ers to make laws on matters enumerated in the Union List. The

Glossary 383
state legislatures have powers to legislate for the state or any part amount in proportion to the salary or wage earned by the employee
thereof on any matter enumerated in the State List. Both the par- subject to a maximum of 20 per cent of such salary or wage.
liament and the state legislatures have powers to make laws with
Minimum (Payment of Bonus Act, 1965): A minimum of
respect to matters enumerated in the Concurrent List. To avoid a
8.33 per cent of the annual salary or wages or INR 100, whichever
possible conflict, certain safeguards are provided for subjects on
is higher, is to be paid as bonus.
which both centre and state can legislate. Labour is a subject that
is included in the Concurrent List. Minimum Wage: The Minimum Wages Act lays down the
mechanism for determination of minimum wages for all kinds
Labour Policy: Includes the treatment of labour under consti-
of employment. The concept of minimum wage in India was
tutional, legislative and administrative Acts, rules and practices,
outlined in a recommendation of a tripartite committee on fair
and various precepts laid down in the successive Five Year Plans.
wages set up in 1948. As per the Act, the government notifies the
Lay-off (ID Act, 1947): The failure, refusal or inability of an minimum wages in different kinds of employment.
employer, on account of shortage of coal, power or raw materials Mode of Payment (Payment of Wages Act, 1936): Wages
or the accumulation of stocks or the break-down of machinery or must be paid in current coin or currency notes or in both and not
natural calamity or for any other connected reason, to give employ- in kind. It is, however, permissible for an employer to pay wages
ment to a workman whose name is borne on the muster rolls of his by cheque or by crediting them in the bank account if so autho-
industrial establishment and who has not been retrenched. rized in writing by an employed person.
Living Wage: Enables the employee to provide for himself/ Mutual Insurance: In exchange for the fees that the members
herself and his/her family, education to children, protection pay to the union, the union renders certain services, which are
against ill health, essential social needs, insurance against mis- more functional in nature.
fortunes, including old age, in addition to the basic sustenance
needs. The upper limit should take the capacity to pay into
consideration. N
National Tribunals: Meant for those disputes that involve the
M questions of national importance or issues that are likely to affect

the industrial establishments of more than one state.
Managerial Trade Unionism: A trend whereby the managers in Negotiation: A way to resolve issues without resorting to
an establishment have organised themselves along the lines of trade actions that hurt or destroy relationships.
unions for the purpose of bargaining with the management. This
trend started mainly in the large PSUs and a few large private sector Neo-Unitary Approach: A variant of the Unitary Approach,
establishments. Neo-Unitary Approach, appears to have emerged in some organiza-
tions since the 1980s. It builds on existing unitary concepts but is
Manufacturing Process: It has a precise meaning under the more sophisticated in the ways it is articulated and applied within
Factories Act, 1948 where it has been defined under section 2(k) enterprises. Its main aim seems to be to integrate employees, as
as any process for: individuals, into the companies in which they work
• Making, altering, repairing, ornamenting, finishing, packing,
Notification Procedure (for fixing and revising minimum
oiling, washing, cleaning, breaking-up, demolishing, or otherwise
wages according to the Minimum Wages Act): In this
treating or adapting any article or substance with a view to its
procedure, the government notifies the proposed revision in the
use, sale, transport, delivery or disposal; or
official gazette. A minimum of two months’ period is provided
• Pumping oil, water sewage or any other substance; or
for persons likely to be affected by the proposal to react and send
• Generating, transforming or transmitting power; or
their representations. The government should also consult the
• Composing types of printing letter press, lithography, photo-
Advisory Board.
gravure or other similar process or book-binding; or
• Constructing, reconstructing, repairing or refitting, finishing or
breaking-up of ships or vessels; or
• Preserving or restoring any article in the cold storage.
O
Occupational Disease: An occupational disease while in
Maternity Benefit Act, 1961: The Maternity Benefit Act of service, is a disease that inflicts workers in that particular occupa-
1961 was, passed to provide uniform maternity benefit for women tion in which s/he was employed, resulting from exposure to a
workers in certain industries not covered by the Employees’ State hazardous working atmosphere, particular to that employment. If a
Insurance Act, 1948. worker contracts such a disease, then the employer is liable to pay
compensation, provided that the worker was employed by him for a
Maternity Benefit: Every woman shall be entitled to, and her
continuous period of six months.
employer shall be liable for, the payment of maternity benefit,
which is the amount payable to her at the rate of the average daily Occupier: As defined in the Factories Act, it means a person
wage for the period of her actual absence. who has the ultimate control of the factory.
Maximum Bonus (Payment of Bonus Act, 1965): Where Open Shop: An organization that does not discriminate
the allocable surplus in an accounting year exceeds the minimum based on union membership in employing or keeping work-
amount to be paid as bonus, the employer is bound to pay an ers. Where a union is active, the open shop allows workers to

384 Glossary
be employed who do not contribute to a union or the collective Preventive Machinery: Has not been defined anywhere in any
bargaining process. Act. However, it comprises: (i) provisions in law that reduce the
scope of conflict (health, safety, wages, etc.); (ii) institutions that
Organized Labour: In the context of industrial relations,
provide for periodic and structured consultations (Indian Labour
organized labour would comprise employees under enterprise/
Conference, Standing Labour Committee, Industrial Committees,
industry/organizations to which most of the labour laws apply.
Works Committee, etc.); (iii) pre-emptive procedures and systems
Overtime: No adult worker shall be required or allowed to work (grievance, standing orders, etc.); and (iv) voluntary codes (Code
in a factory for more than nine hours in any day or for more than of Discipline).
forty-eight hours in a week. Work in excess of that shall be treated
Principal Employer: The manager or occupier of a factory
as overtime. Where a worker works in a factory for more than nine
or head of the department of a government/local authority who
hours in any day or for more than forty-eight hours in any week, he
employ contract labour.
shall, in respect of overtime work, be entitled to wages at the rate of
twice his ordinary rate of wages. Psychological Contract: Represents the mutual beliefs, per-
ceptions, and informal obligations between an employer and an
P employee. It sets the dynamics for the relationship and defines the
detailed practicality of the work to be done. It is distinguishable
Participation Rate: The proportion of people in the labour from the formal written contract of employment, which, for the
force out of total cohort population. most part, only identifies mutual duties and responsibilities in a
generalized form.
Pay Day (Payment of Wages Act, 1936): Wages must be
paid on a working day and not on a holiday. When there are less
than 1,000 persons employed, the wages shall be paid before the
expiry of the seventh day of the following month. When there
R
are more than 1,000 workers, the wages are to be paid before the Radical Approach: Mainly Marxist, wherein industrial
expiry of the 10th day of the following month. conflict is an inevitable but small part of class struggle between
labour and capital or the proletariat and the bourgeoisie. Indus-
Permanent Partial Disablement: Disablement that reduces
trial conflict and organized labour are but a means for larger
the capacity to work in any employment similar to that the
transformation.
worker was performing at the time of the accident.
Radicalism: Views commercial and industrial harmony as
Permanent Total Disablement: Disablement that incapacitates impossible until the labour controls the means of production, and
a worker from all kinds of work. benefit from the generation of wealth.
Philadelphia Declaration: The objectives of the ILO were Ratification: Once adopted at the International Labour
further refined by way of a conference held in the year 1944 at Conference, the member states need it to be submitted to their
Philadelphia. The outcome of the Philadelphia conference was competent authority for ratification (the parliament in our case).
later incorporated in the Constitution of the ILO as the Philadel- Ratification makes it a legally binding document and thereafter
phia Declaration. the member states have to create suitable legal provisions to
Picketing: The action taken by unionists to prevent willing enforce the convention.
employees from attending work after a strike has been called. This Rationalization (of manpower): Strictly, it means bring-
activity is usually carried out at the gate or entrance but may also ing the manpower requirements of a firm to optimum levels. In
be done at any other location near or far from the factory or a sec- practice, however, it largely means measures to reduce redundant
tion of it. manpower through redeployment, voluntary separation schemes,
outsourcing, etc.
Pluralism: The existence of more than one ruling principle. The
pluralist approach to IR accepts conflict as inevitable but contain- Recognition Disputes: Disputes over the right of a trade
able through various institutional arrangements. union to represent a particular class or category of workers for
purposes of collective bargaining.
Post-capitalist Society: An open society in which political,
economic and social power is increasingly dispersed and in which Recognition (of a trade union): A trade union may be recog-
the regulation of industrial and political conflict are of necessity nised (by the management) as representing the body of employees
dissociated. in the whole establishment provided it has a majority of employees
supporting it. There is no central legislation for the recognition of
Preferential Union Shop: Wherein additional recognition by trade unions though a few state governments, either through legis-
agreement is accorded by the management to give first chance to lation or rules framed for recognition, have provision for recogni-
union members in recruitment. tion of a union based on membership verification.
Premises and Precincts: It is a term used in the definition Reformist Unions: Aim at the preservation of the capital-
of “factory” under the Factories Act, 1948. Though not spelt out ist economic structure through the maintenance of employer–
clearly in the Act itself, through various interpretations under judi- employee relationship. They do not seek to change the existing
cial rulings, premises corresponds to building whereas precincts social, economic or political structure of the State or the business
correspond to a delineated area. strategy of the industrial unit.

Glossary 385
Registration (of a trade union): Under the Trade Unions the excess shall, subject to a limit of 20 per cent of the total salary
Act, 1926, there is provision of registration of Trade Unions with or wage of the employees employed in the establishment in that
the Registrar of Trade Unions. Any seven or more members of a accounting year, be carried forward for being set-on in the suc-
Trade Union may apply for registration of the Trade Union under ceeding accounting year and so on up to and inclusive of the fourth
this Act by subscribing their names to the rules of the Trade accounting year to be utilized for the purpose of payment of bonus.
Union and by complying with the provisions of this Act with
Settlement Machinery: Once an industrial dispute arises,
respect to registration.
the ID Act (1947) has provisions for three-tier machinery—
Registration under Contract Labour (R&A) Act: Every conciliation, arbitration and adjudication—for the settlement of
establishment that intends to employ contract labour, is required the dispute.
to get registration as a Principal Employer from the appropriate
Shop Stewards: Members who occupy an official position in
government.
the union hierarchy and who are also employees of an organization.
Regulatory Union: A union whose main aim is to protect
Shops and Establishments Act, 1953: These are laws
workers’ rights. They function on the ideology of economic and
pertaining to conditions of employment of employees in the
social justice, and regulate any decision or policy that violates the
unorganized sectors mainly. These are “state” government legisla-
“rights” of workers.
tions and vary from state to state.
Retirement: Termination of the service of an employee other
Sickness: A condition that requires medical treatment and atten-
than on superannuation.
dance and necessitates abstention from work on medical grounds.
Retrenchment (ID Act, 1947): The termination by an
Sit-in Strike: Not only work stoppage but also refusal by strik-
employer of the service of a workman for any reason whatsoever,
ers to vacate the premises.
other than as a punishment inflicted by way of disciplinary action. It
does not include—voluntary retirement of the workman; or retire- Social Action Theory: Emphasizes the individual responses
ment of the workman on reaching the age of superannuation if the of the social actors, such as managers, employees and union
contract of employment between the employer and the workman representatives to given situations, focusing on understanding
concerned contains a stipulation in that behalf; or termination of the particular actions in industrial relations situations rather than on
service of the workman as a result of the non-renewal of the contract just observing explicit industrial relations behaviour. This con-
of employment between the employer and the workman concerned. trasts with systems theory, which regards behaviour in industrial
Revolutionary Theory: This theory proposes that the means of relations as reflecting the impersonal processes external to the
production must belong to the workers. Trade unions are instru- system’s social actors over which they have little or no control.
ments for a revolution in which the capitalists must be destroyed Social Security: Social security, in the context of employment
and the workers (proletariat) must take over the industry and, relations aims at access to health care and income security, in
in turn, the government. Trade unions were a means towards cases of old age, loss of employment, sickness, disability, work
the achievement of a classless society. With this approach, trade injury, maternity or loss of a main income earner.
unions were regarded as a component in the larger political pro-
cess for the establishment of a classless society. Socio-psychological Theory: Proposes that members join a
Union primarily for meeting their socio-psychological needs like
Revolutionary Unions: Aim at destroying the present structure security, esteem, companionship, etc.
and replacing it with a new order that is regarded as preferable to
the working class. They could be anarchist or political in nature. Soft Skills: Skills by which the individual interacts with,
interprets, structures, coordinates or otherwise informs the social
and physical environments within which physical, societal and/or
S personal product may be generated.
Sole Bargaining Agent: A provision making it binding for a
Salary: Fixed, regular (usually monthly) payment to an employee.
recognized union alone to bargain on behalf of all the employees.
Set-off: Where, for any accounting year, there is no available
Spread-over: The periods of work of an adult worker in a fac-
surplus, or the allocable surplus in respect of that year falls short
tory shall be so arranged that inclusive of his intervals for rest, they
of the amount of minimum bonus payable to the employees in
shall not spread over more than ten and a half hours in any day.
the establishment under Section 10 of Payment of Bonus Act,
and there is no amount or sufficient amount carried forward and Strike: Refers to a collective refusal to work by the workers with
set-on under Sub-section (1), which could be utilized for the a view to bring pressure on the management to accede to a demand;
purpose of payment of the minimum bonus, then such minimum this is the meaning in its simplest form, although an elaborate defini-
amount or the deficiency, as the case may be, shall be carried tion has been given in the Industrial Disputes Act, 1947
forward for being set-off in the succeeding accounting year and so
on up to and inclusive of the fourth accounting year. Subsistence Worker/Employment: Subsistence workers
are those who hold a self-employment job, and in this capacity,
Set-on: Where, for any accounting year, the allocable surplus produce goods or services that are predominantly consumed by
exceeds the amount of maximum bonus payable to the employees their own household, and constitute an important basis for its
in the establishment under Section 11 of the Payment of Bonus Act, livelihood.

386 Glossary
Superannuation: In relation to an employee, it means the employed in industries and to ensure a speedy and effective remedy
attainment by the employee of such age as is fixed in the contract against illegal deductions and/or unjustified delay caused in the
or conditions of service at the attainment of which the employee payment of wages to them. The Payment of Wages Act, 1936 is a
shall vacate the employment. central legislation, which applies to the persons employed in facto-
ries, industries and other establishments.
Systems Model: An industrial relations system, at any one
time in its development, is regarded as comprising certain actors, The Standing Orders Act, 1946: An act that purports
certain contexts, an ideology that binds industrial relations sys- to statutorily lay down the conditions of employment of
tems together and a body of rules created to govern the actors at industrial employees. It also provides for the process for lay-
the workplace and work community. ing down and certifying these conditions of work known as
“Standing Orders”.
T Trade Union Congress: A federation of trade unions in the
Temporary Disablement: This may be total or partial disable- United Kingdom, representing the majority of trade unions.
ment, of temporary nature, which reduces the earning capacity of the Trade Unions: Are associations of workers united as a single,
worker in any similar employment for the period of disablement. representative entity for the purpose of improving the work-
ers’ economic status and working conditions through collective
Terminal Wage (Payment of Wages Act, 1936): When
bargaining with employers.
the employment of any person is terminated, the wages earned
by him must be paid before the expiry of the second working day Tripartism: Consultations involving the three actors of indus-
from the day of termination. trial relations, namely, the employer, the employee and the State
with a view to having a consensual approach on issues affecting
Thatcherism: Margaret Thatcher’s political and economic
the three parties.
philosophy of reduced state intervention, free markets, and entre-
preneurialism. Tripartite Bodies: All bodies that have representation from
employees, employers and the government.
The Contract Labour (Regulation and Abolition) Act,
1970: Seeks to regulate the employment of contract labour Trusteeship: An approach to industrial relations credited
in certain establishments and to provide for its abolition under mainly to Mahatma Gandhi. A business enterprise has the inher-
certain circumstances. ent responsibility to its consumers, workers, shareholders and the
community. The responsibilities are mutual. A business enterprise
The Factories Act, 1948: Is an Act that consolidates all laws is meant for good for all and not just for profits. The enterprise,
regulating labour in factories with the aim of protecting workers in effect, must act as trustee to the interests of all. According to
employed in factories against industrial and occupational hazards. Gandhi, conflicts are inevitable in an industrializing society, but
The Governing Body: Is the executive body of the Interna- labour and capital must learn to peacefully coexist for mutual
tional Labour Office (please note that International Labour Office benefit and for the community at large.
is one of the sub-systems of the International Labour Organi-
zation). The Governing Body oversees the functioning of the
Labour Organization. The Governing Body: a) decides the agenda U
of the International Labour Conference; b) helps finalize the draft
Union Security: Comprises the tools and methods that trade
of Works Programme and Budget of the ILO for submission to
unions use to keep “free riders” from enjoying the benefits of
the ILC; and c) Elects the Director-General (of the International
collective bargaining by the unions. It usually takes the form of an
Labour Office).
agreement between the union and the employer about the extent
The Minimum Wages Act, 1948: The Minimum Wages Act to which Union may force membership or to collect dues and fees
aims at establishing a mechanism for fixing minimum wage rates from the members.
in various kinds of employments. Union Shop: Employs non-union workers as well, but sets a
The Payment of Bonus Act, 1965: The object of the Pay- time limit within which new employees must join a union.
ment of Bonus Act aims to impose statutory liability upon the Unitarism: Assumes that the objectives of all involved are
employer to bonus to the employees and goes on to define the the same or compatible, and concerned only with the well-
principles of payment of bonus. being of the organization and its products, services, clients and
customers.
The Payment of Gratuity Act, 1972: It is a beneficent piece
of social-security legislation that aims at providing a scheme for Unitary Approach: An approach to IR that advocates every
providing gratuity to employees engaged in factories, mines, oil work organization is an integrated and harmonious whole,
fields, plantations, ports, railways, shops and other establish- existing for a common purpose. That the labour and manage-
ments. The gratuity was to be paid in the event of superannuation, ment are working towards a common objective.
retirement, resignation, death or total disablement due to accident
Unorganized Labour: In the context of Industrial Relations,
or disease.
unorganized labour would comprise labour to which most of the
The Payment of Wages Act, 1936: The Payment of Wages labour laws do not apply and also who lack any kind of formal
Act, 1936 was enacted to regulate the payment of wages to workers representative body.

Glossary 387
V Wildcat Strike or Walk-Out: Usually by a small section of

workers who may defy even their own union leaders, and could
Voluntary Arbitration: A choice made by the contending par- be in response to a small shop-floor issue or an argument between
ties for arbitration, before referring it for adjudication. a manager and a single employee.
Worker: Defined under the Factories Act, 1948, worker means
W a person employed, directly or through any agency (including
a contractor) with or without the knowledge of the principal
Wage Board: A tripartite body, which has representation of employer, whether for remuneration or not, in any manufactur-
employers and labour besides independent members. It was envis- ing process, or in cleaning any part of the machinery or premises
aged as machinery for wage fixation in specified industries, and used for a manufacturing process, or the subject of the manufac-
also as a means for implementing many wage-related policies and turing process but does not include any member of the armed
principles laid down by the various committees and commissions. forces of the union.
Wage Period (Payment of Wages Act, 1936): The period Workers Participation in Management: An approach to
to be fixed for paying wages to an employed person must not involve the participation of workers in the management of the
exceed one month. That means an employer can choose to pay industrial unit through making effective use of workers’ commit-
wages to a person employed by him for a period of every week or tees, joint consultation and other methods. This may improve com-
every fortnight, but not for a period of every two months or every munication between managers and workers, which may, in the long
three months. run, increase productivity and lead to greater effectiveness.
Wage Structure: Signifies the relationship of wage rates for the Workers’ Organizations: Institutions or/and associations
entire job within the company, industry or labour market areas. of employees formed and maintained for the specific purpose of
Wage: Regular payment to an employee for his or her work. negotiating concessions and benefits from the employers.
Wage is basically the price that an organization is willing to pay Work-in Strike: The workers do not stop work but continue
for having a particular job carried out as also the price at which the production in defiance of management, who may have
an employee is willing to sell his/her labour. stopped production or declared a closure. It is thus the opposite
Wages: Usually means compensation in exchange of labour. The of a usual strike—not a withdrawal of work but a continuation of
compensation though mostly financial, need not necessarily be so. work to defy management.
Different labour legislations have defined “wages” differently. Workmen’s Compensation Act, 1923: The Workmen’s Com-
Under the Payment of Wages Act, 1936, the term wages means all pensation Act is the first piece of legislation towards social security.
remuneration (whether by way of salary, allowances or otherwise) It deals with compensation for workers who are injured or contract
expressed in terms of money or capable of being so expressed, which occupational disease in the course of duty.
would, if the terms of employment express or implied were fulfilled,
be payable to a person employed in respect of his employment or of Workmen’s Compensation: Provides cover for medical care
work done in such employment. and compensation for employees who are injured in the course
of employment, in exchange for mandatory relinquishment of
Weekly Holiday: No adult worker shall be required or the employee’s right to sue his or her employer for negligence at
allowed to work in a factory on the first day of the week workplace.
(Sunday) unless given a full day’s holiday on one of the three
days immediately before or after the said day. This section also Work-to-Rule and Go-Slow: Under these methods, unions
specifies that this substitution should not result in any worker may not officially stop work but work only at a slower pace or
working for more than ten days consecutively without a holiday specifically refuse to do certain tasks, which have the effect of
for a whole day. reducing the total output, or disrupting the work process.


INDEX
A B CITU, see Centre of Indian
accidents, 195–96 bandh, 250 Trade Unions
accounting year, 235 BATNA, 359–61 class conflict, 19
ACTU, see Australasian best alternative to no closed shop, 95, 104
Council of Trade agreement, see BATNA closure of undertaking,
Unions Bharatiya Mazdoor Sabha, 269–70
adjudication, 272, 286–90 105–107 CLRC, see Central Labour
performance, 290 bipartite bodies, 305 Relations Commission
types of, 287 blue-collared workers, 3 code of discipline, 31–32,
AFL, see American Federation BMS, see Bharatiya Mazdoor 308–314
of Labour Sabha collective bargaining, 41,
AFL-CIO, see American Board of Conciliation, 282 311–14
Federation of Labour and Bombay Industrial Relations concept of, 312
Congress of Industrial Act (1946), 110 conditions for success of,
Organizations Bombay Millhand’s 312–14
agency shop, 104 Association, 101 Committee on Conventions, 27
AITUC, see All India Trade Bombay Trade Disputes Committee on Fair Wages, 324
Union Congress (Conciliation) Act compensation, 208, 209–210
All India Railwaymen’s (1934), 28 competitive phase, 34–35
Federation, 101 bonus, 164, 232–41 compulsory arbitration, 284
All India Trade Union bonus commission, 233 computerization, 66
Congress, 101, 105–107 boycott, 250 conciliation, 42, 271–72,
All-China Federation of Trade Britain, industrial relations in, 279–81
Unions, 56 50–51 Conciliation and Arbitration
allocable surplus, 237 evolution of, 50–51 Act (1904), 54
American Federation of trade unions in, 51–52 conciliation officers, 279–81
Labour, 53 business theory, 84 duties and powers of, 279–80
American Federation of role in settlement, 280–81
Labour and Congress C Concurrent List, 340
of Industrial capitalists, 16 conflict, 143–44, 351–57
Organizations, 53 Central Board of Workers’ approaches to resolve,
arbitration, 42, 272, 283–86 Education, 344 352–56
advantages of, 284 Central Industrial Relations conflict-ridden interventionist
compulsory, 284 Machinery, 334 phase (1966–1976), 33
disadvantages of, 284 Central Labour Relations congenial industrial relations,
voluntary, 284–85, 286 Commission, 289 conditions for, 10
Asia Pacific, industrial relations Centre of Indian Trade Unions, Congress of Industrial
in, 18 102–107 Organizations, 53
Australasian Council of Trade CFW, see Committee on Fair consolidation phase
Unions, 55 Wages (1956–1965), 31–33
Australia, industrial relations chaebol, 58–59 Contract Labour (Regulation
in, 54–55 China, industrial relations in, and Abolition) Act (1970),
evolution of, 54 36, 56–57 184–89
recent changes in, 55 historical perspective, 56 central and state advisory
trade unions in, 55 recent changes in, 56 boards, 188
Australian Workplace trade unions in, 56–57 duties of contractors, 186
Agreements, 55 CIO, see Congress of Industrial duties of the controlling
automation, 66 Organizations authorities, 185
autonomous organizations, CIRM, see Central Industrial facilities for contract
343–44 Relations Machinery labour, 188
Z02_SING6013_01_Index.indd 389 6/11/10 6:31:30 PM

390 Index
Contract Labour (Cont.) Employee Deposit Linked Insurance coverage of, 165
objectives of, 184 Fund, 217 objectives of, 165
payment of wages, 188 employee relations manager, 149 provisions of, 168–83
registration and licensing, 185 employee relations Section 11, Cleanliness, 170
scope and coverage of, 185 conditions for, 133 Section 12, Disposal of waste and
contractor, 186 culture and, 149–53 effluents, 170
Core Conventions, ILO, 27–28 definition of, 127 Section 13, Ventilation and temperature,
Abolition of Forced Labour Convention, factors influencing, 128–29 170
27 future of, 153–56 Section 14, Dust and fume, 170
Discrimination (Employment goals of, 127 Section 15, Artificial humidification,
Occupation) Convention, 28 measures for, 133 171
Equal Remuneration Convention, 28 objectives of, 132 Section 16, Over-crowding, 171
Forced Labour Convention, 27 principles of, 129–30, 144–46 Section 17, Lighting, 171
Freedom of Association and Protection procedures and policies of, 147–48 Section 18, Drinking water, 171
of Right to Organized Convention, 28 scope of, 131 Section 19, Latrines and urinals,
Minimum Age Convention, 28 in strategic framework, 142–44 171–72
Right to Organize and Collective structures, 146–47 Section 20, Spittoons, 172
Bargaining Convention (1949), 28, 313 at workplace, 144–49 Section 21, Fencing of machinery,
Worst Forms of Child Labour Employees’ State Insurance Act, (1948), 172–73
Convention, 28 196–204, 206 Section 22, Work on or near machinery
cost of living index number, 228 administration of, 199–201 in motion, 173
craft union, 53, 92 benefits of, 201–203 Section 23, Employment of young
culture design, 152–53 obligations of employers, 203–204 persons on dangerous machines, 173
scope, applicability and coverage of, Section 24, Striking gear and devices for
D 196–98 cutting off power, 173
dearness allowance, 328 employee–employer relationship, 125–26 Section 25, Self-acting machines, 173
decentralized bargaining, 103 Employees’ Provident Fund Organization, Section 26, Casing of new machinery,
deductions, 226–27 343–44 173–74
damage or loss, 227 Employees’ Provident Funds and Section 27, Prohibition of employment
fines, 226–27 Miscellaneous Provisions Act (1952), of women and children near cotton
Department of Labour, 335 214–17 openers, 74
dependant’s benefit, 202–203 objectives of, 214–15 Section 28, Hoists and lifts, 174
direct action, 85 provisions of, 216–17 Section 29, Lifting machines, cranes,
directionless phase (1977–1980), 34 scope and coverage of, 215 chains, ropes and lifting tackles, 174
Directive Principles of State Policy, 30 Employees’ State Insurance Corporation, 343 Section 30, Revolving machinery, 174
disablement benefit, 202 employment injury, 199 Section 31, Pressure plant, 174
disciplinary procedures, 315–18 enhanced sickness benefit, 202 Section 32, Floors, stairs and means of
discipline, 314–16 enterprise unions, 57 access, 174
disintermediation, 66 equity, 144–45 Section 33, Pits, sumps, opening in
dispute, 252–53. See also industrial ER manager, role of, 374–76 floors, 174
disputes ESI corporation, 199–200 Section 34, Excessive weights, 174
classification of, 253 ESI scheme financing, 200 Section 35, Protection of eyes, 174
historical perspective, 256–62 essential skills, 364–65 Section 36, Precaution against
types of, 252–53 ETUC, see European Trade Union dangerous fumes, 174
disputes of interest, 253 Confederation Section 36 A, Precautions regarding the
disputes of rights, 253 European Trade Union Confederation, 53 use of portable light, 175
distributive bargaining, 359–61 European Union, industrial relations in, Section 37, Explosive or inflammable
distributive negotiation, 359–61 52–53 dust, gas, 175
Dual Concern Model of Conflict collective bargaining in, 52 Section 38, Precautions in case of fire,
Resolution, 356 trade unions in, 52 175
Dunlop model, 13–14 workplace representation in, 53 Section 39, Power to require
Dwarkapur Steel Plant, 100 exempted employee, 198 specification of defective part or tests
extended sickness benefit, 201–202 of stability, 75
E Section 40, Safety of buildings and
economic growth competitive phase, 34–35 F machinery, 175
economic strike, 248 Factories Act (1948), 165–82 Section 40 A, Maintenance of
emotional intelligence, 372–73 applicability of, 165–66 buildings, 175

Index 391
Section 40 B, Safety officers, 175 H Industrial Relations Commission, 44

Section 41, Grants rule-making power Hind Mazdoor Sabha (HMS), 102, 105 industrial relations management
to states, 175 HR manager, 136 conditions for, 132
Section 42, Washing facilities, 177 human capital, 123 factors influencing, 127–28
Section 43, Facilities for storing and human resource management (HRM), 134 measures for, 133
drying clothing, 177 Human Rights Conventions, 27–28 objectives of, 131–32
Section 44, Facilities for sitting, 177 human-resource approach, 134 principles of, 129–30
Section 45, First-aid appliances, 178 scope of, 130–31
Section 46, Canteens, 178 I industrial tribunals, 289–90
Section 47, Shelters, rest rooms and illegal lockout, 266 Industrial Truce Resolution (1947), 29,
lunch rooms, 178 illegal strikes, 266 32, 326
Section 48, Crèches, 178 ILO, see International Labour industrial union, 93
Section 49 Welfare officers, 178 Organization industrial workforce, changing
Section 50, 178 Indian Labour Conference, 26 characteristics of, 67–71
Section 51, Weekly hours, 179 Indian National Trade Union Congress, factors facilitating adaptation to
Section 52, Weekly holidays, 179 102, 105–107 changes, 68–69
Section 53, Compensatory holidays, 179 Indian Trade Unions Bill (1925), 101 impact on workforce, 68
Section 54, Daily hours, 179 indiscipline, 315–16 industries. See also industrial relations
Section 55, Intervals for rest, 179 industrial action, 248–52 changing characteristics of, 65–67
Section 56, Spread-over, 180 lockout, 248,266 insurable employment, 198
Section 57, Night shifts, 180 strike, 248–52 insured person, 198
Section 58, Prohibition of overlapping industrial committees, 26, 305 integrative bargaining, 360–61
shifts, 180 industrial conflict, 245–46 integrative negotiation, 360–61
Section 59, Extra wages for overtime, 180 ER perspective of, 246 international factors, 48–49
Section 60, Restriction on double IR perspective of, 245–46 International Labour Conference, 298–99
employment, 180 industrial democracy, 145 International Labour Office, 299
Section 61, Notice of periods of work industrial disputes, 24, 247 International Labour Organization (ILO)
for adults, 180 causes of, 253–55 aims and objectives of, 296–98
Section 67, Prohibition of employment concept of, 247–48 Core Conventions of, 27–28. See also
of young children definition of, 247 Core Conventions
Section 7 A, 169 historical perspective of, 256–62 Governing Body, 299
Section 7(1), 169 Industrial Disputes Act (1947), 28, 263–72 impact on Indian Labour Relations,
Section 79, Annual leave with wages closure of undertaking, 269–70 27–28
structure of, 169 last in–first out, 270 origin of, 296
fair wage, 324 lay-off, retrenchment and closure, 266–69 preamble to, 298
FedEx, 140 objectives of, 263 ratification procedures of, 27–28
Fifth Five Year Plan (1975–1980), 29, 34 prohibition of strikes and lockouts, structure, the standards and the
flexibility, concept of, 146 265–66 processes at, 298–301
flexible workforce, 146 settlement machinery, 270–72 international trends, 60–61
Fourth Five Year Plan (1969–1974), 33 unfair labour practices, 270 inter-union rivalry, 109
freedom of association, 86 Industrial Disputes Act (Rajasthan intra-union rivalry, 109
fundamental rights, 30 Amendment) (1958), 110 INTUC, see Indian National Trade Union
funeral expenses, 203 industrial harmony, 43 Congress
FXTV, 140 Industrial Policy Resolution, 29, 326
industrial relations J
G characteristics in India, 24–25 Japan, industrial relations in, 57–58
Gandhian approach, 17 evolution of, 3–5 collective bargaining in, 58
general strike, 249 factors shaping, 8 historical perspective of, 57
general unions, 93 features of, 9–10 trade unions in, 57–58
gheraos, 42, 250 historical perspective of, 47–49 Japanese Trade Union Confederation, 57
globalization, 67 literature survey on, 7 Jet Airways, 7
Government of India Act (1935), 28, 337 objectives at enterprise level, 8 job evaluation, 327–28
gratuity, 212–14 objectives at State level, 8–9 joint consultative tripartite bodies, 302–305
grievance, 310–11 participants of, 10–11 joint management councils, 308
open-door policy, 310 principles for, 10
procedure in Indian industry, 310–311 scope of, 6–8 K
step-ladder policy, 310 various definitions of, 5–6 Kamgar Hitwardhak Sabha, 101

392 Index
L Ministry of Labour, 342 Pfizer, 126

labour administration, 334–45 misconduct, 315, 316 Philadelphia Declaration, 297
concept of, 335–36 picketing, 85, 250
evolution in India, 337–38 N pluralism, 15, 143
role of ILO in, 344–45 National Arbitration Promotion Board, post-capitalism, 15–16
scope of, 336–37 285–86 preferential union shop, 104
labour administrative machinery, National Commission on Labour (1969), preventive machinery, 23
342–44 104, 108 primary strikes, 248–50
labour appellate tribunal formula, 233 National Commission on Labour (2002), economic strike, 248
labour courts, 287–89 345–46 general strike, 249
composition of, 288 National Joint Committee for the Steel slow-down strike, 249
duties of, 288 Industry, 294 stay-in strike, 249
issues referred to, 288 National Confederation of Trade work to rule, 249
jurisdiction of, 288–89 Unions, 58 principal employer, 186–87
labour laws, 36–37, 162–64, 340–41 National Labour Relations Act (1935), 54 Printers’ union, 101
labour legislation, 161–63 National Tribunals, 290 productivity-, efficiency-, quality-
labour policy, 25, 338–40 negotiation, 357–64 orientation phase (1981–1990), 34
labour practices, 270 definition of, 357 protectionism, 29
labour relations commissions, 291 integrative and distributive strategies of, protective phase (1947–1956), 29–31
labour standard, 300–302 359–61 provident fund, 214–17
Labour-Management Relations Act, 54. processes involved in, 362–64 psychological contract, 123
See also Taft Harley Act (1947) situations requiring, 358–59
laissez-faire phase, 47 neo-unitary approach, 12–13 R
Landrum Griffin Act (1959), 54 new economic policy, 34–35 radical approach, 17–19
last IN–first OUT, 270 non-statutory measures, 262–63 radicalism, 143
lay-off, 264, 266, 267–68 Norris La Guardia Act (1932), 54 rationalization of manpower, 66–67
legislations reformist unions, 92
social-security, 163–64 O regulatory unions, 92
wage and bonus, 163–64 obligations, 281–82 Rengo, see Japanese Trade Union
line function, 134–35 of employees, 282 Confederation
linkage human resource management, 134 of employers, 281 retrenchment, 264, 267–68
living wage, 324 occupational diseases, 209 revolutionary theory, 83
lockout, 42, 248, 264, 265–66 open shop, 104 revolutionary unions, 92
LRC, see labour relations commissions open-door policy, 310 Royal Commission on Labour (1931), 28
organizational behaviour, 152–53
M S
Madhya Pradesh Industrial Relations Act P safety provisions, 172–75
(1960), 110 paradigm shift, 123–25 Second Five Year plan, 32
manager, job description of, 135 participants, dynamics of, 10–11 Second National Commission on Labour,
managerial trade unionism, 117 participation rate, 69 36–37, 289, 290–91
manufacturing process, 166 Payment of Bonus Act (1965), 232–41 secondary strikes, 250–51
Marxian approach, 17–19 applicability of, 233–34 bandh, 250
Marxists, 17–19 objectives of, 233 boycott, 250
Maternity Benefit Act (1961), 204–205 payment of contribution, 216–17 gherao, 250
coverage of, 204 Payment of Gratuity Act (1972), 212–14 picketing, 250
exemption from, 198 calculation of gratuity, 213 sympathetic strike, 250
objectives of, 204 gratuity not payable, 213 settlement machinery, 24, 270–72
provisions of, 204–205 obligations of the employer, 214 Seventh Five Year Plan (1985–1990), 34
maternity benefit, 202 process for receiving payment, 214 severity of effects, 253
maximum bonus, 236–37 scope, coverage and definitions, 212–13 shop stewards, 51
mediation, 271–72 Payment of Wages Act (1936), 224–27 Shops and Establishments Act (1953),
medical benefit, 201 coverage of, 225 182–84
minimum bonus, 236–37 provisions of, 226–27 main provisions of, 183–84
minimum wage, 324, 325 pension fund, 217 objectives of, 182
Minimum Wages Act (1948), 227–32, 324 permanent partial disablement, 199, scope and coverage of, 183
objectives, scope and coverage of, 228 210–11 sickness benefit, 201
provisions of, 229–32 permanent total disablement, 199, 210–11 Singapore, industrial relations in, 59–60

Index 393
Sixth Five Year Plan (1980–1985), 34 classification of, 92–94 USA, industrial relations in, 53–54
skills, 364–65 concept of, 81–85 labour legislations in, 53–54
slow-down strike, 249 determinants of growth of, 93–94 trade unions in, 53
SLC, see Standing Labour Committee in the European Union, 52 UTUC, see United Trade Congress
SLRC, see State Labour Relations evolution of the structure of, 93
Commission features of, 91–92 V
social action theory, 16–17 impact of, 83 V. V. Giri National Labour Institute, 344
social dialogue, 298 in India, 112–4 voluntary arbitration, 284–85, 286
social security, 163–64 in Japan, 57–58 voluntary arrangements, 341
Socio-psychological theory, 84 inter-union rivalry in, 109
soft skills, 371–76 intra-union rivalry in, 109 W
sole bargaining agent, 24 origin of, 82–83 wage
South Korea, industrial relations in, phases of growth in India, 101–103 components of, 328–29
58–59 political affiliations of, 105–107 context and concept of, 323
historical perspective of, 58–59 politics and, 85–86 definition of, 324
trade unions in, 59 principles of, 83 determinants of, 329–30
special economic zones, 9 problems of, 107–110 wage administration, 325
staff function, 134–35 proliferation of, 107–109 job evaluation, 327–28
staff union, 93 reasons for joining a, 84 legislation, 325
Standing Labour Committee, 26 recognition of, 110–11 recommendation of expert committees/
State intervention, 48 rights of, 111 commissions, 326
State Labour Relations Commission, 289 roles, functions and objectives of, Wage Boards, 326–27
State List, 340 87–92 wage legislation
statutory measures, 262–63 strategies for the achievement of, need for, 224
stay-in strike, 249 94–95 regulation of wages, 224
steel industry in India, 332–33 structure of trade unions in India, wage policy, 330–31
step-ladder policy, 310 103–104 wage structure, 330
strike, 248–52 in South Korea, 58–59 Wagner Act, 54
management actions to, 251–52 theories for the emergence of, 83–84 Weber’s Social Action Approach, 16–17
primary strikes, 248–50 tools of, 84–85 white-collared workers, 3
secondary strikes, 250–51 in the UK, 51–52 wildcat strike, 85
subordinate offices, 343 unfair labour practices with regard to, win–lose bargaining, 359
subsistence workers, 69 112 work composition, 143
superannuation, 212–13 in the USA, 53 work to rule, 85, 249
sympathetic strike, 250 tripartism, 26–27, 301–302 worker
systems approach, 13–14 tripartite bodies, 303–304 blue-collared, 3
tripartite committee, 27 horizontal differentiation, 4
T trusteeship approach, 17 vertical differentiation, 4
Taft Hartley Act (1947), 54 white-collared, 3
Tata Group, 122 U Workmen’s Compensation Act (1923),
Tata Motors, 80 unfair labour practices, 270 198, 206–212
temporary disablement, 199, 211 Union List, 340 compensation, 209–212
Thatcherism, 51 union security, 104 scope and coverage of, 206–209
Trade Disputes Act (1929), 28, 325 agency shop, 104 workplace
Trade Unions Act (1926), 24, 102, 114–17 closed shop, 104 principles of, 144, 146
objectives of, 115 open shop, 104 procedures and policies of,
provisions of, 115 preferential union shop, 104 147–49
scope and coverage of, 115 union shop, 104 structure of, 146–47
Trade unions unions, recognition of, 41 Works Committee, 305–308
activities of, 90–91 unitarism, 142
in Australia, 55 unitary approach, 12–13 Z
characteristics of, 82 United Trade Congress, 105–107 Zenroren, see National Confederation of
in China, 56–57 unorganized labour, 35 Trade Unions

Employee Relations Management by P. N. Singh, Neeraj Kumar

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Employee

A00_SING6013_01_FM.indd i 6/21/10 4:29:31 PM

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Delhi • Chennai • Chandigarh

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Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd.

Published by Dorling Kindersley (India) Pvt. Ltd., licensees of Pearson Education in

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To my parents, Kusum and Balram Thakur.

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2 Industrial Relations in India 22

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2.2.5 The Productivity-, Efficiency-, Quality-orientation

3 Industrial Relations in Major Industrialized

4 The Changing Characteristics of Industry

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4.2 THE CHANGING CHARACTERISTICS OF THE INDUSTRIAL

5 Trade Unionism and Trade Unions 80

6 Trade Unions in India 100

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6.1.3 The Second Post-independence Phase (Mid-1960s–1980) 102

PART II PARADIGM SHIFT

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Summary 136 • Key Terms 137 • Review Questions 137 •

8 Employee Relations Management at Work 140

PART III LEGISLATIONS AND ADMINISTRATION

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9.5.5 Duties of the Controlling Authorities 185

10 Social-security Legislations 194

11 Wage Legislation 222

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11.2 THE PAYMENT OF WAGES ACT, 1936 224

12 Industrial Relations: Institutional Framework

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12.12 THE INDUSTRIAL DISPUTES ACT, 1947 263

13 Industrial Conflict: Settlement Machinery 276

14 Industrial Disputes: Institutional Framework

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14.2.2 Joint Consultative Tripartite Bodies 302

15 Wage Determination, Wage Administration

16 Labour Administration 334

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16.7.4 The Autonomous Organizations 343

18 Soft Skills for Employee Relations 370

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The Motivation for This Book

From Industrial Relations to Employee Relations

The Organization of the Book

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Chapter Outlines Learning Objectives

CHAPTER OUTLINE LEARNING OBJECTIVES

Tata’s Takeover of Jaguar and Land Rover1

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Policies and Procedures Margin Definitions and Notes

REVIEW QUESTIONS Review Questions

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QUESTIONS FOR CRITICAL THINKING

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